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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter August 18, 2022 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Securities / SEBI Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Articles DIFFERENT TYPES OF DECLARED SERVICES: WHAT CBIC HAS TO SAY !! Critical study of provisions of CENTRAL GOODS AND SERVICES TAX ACT, 2017–( in short CGST) Section 12 about time of supply of goods which is part of ‘CHAPTER IV – Time and Value of supply’ and relevant portion of section 31 – relating to Tax Invoice. –Tenth article in the series. Excise duty cannot be demanded for clandestine removal based on third party evidence Waiver of pre-deposit is not tenable on account of financial inability News Cabinet approves enhancement in the corpus of Emergency Credit Line Guarantee Scheme for increasing the limit of admissible guarantees Notifications DGFT 27/2015-20 - dated 17-8-2022 - FTP Amendment in Policy condition of Export of Rice (Basmati and Non-Basmati)- Policy condition at SI. No. 55 and 57, Schedule 2 of ITC (HS) Export Policy, 2018 amended. GST - States (11/2022) FD 07 CSL 2022 - dated 10-8-2022 - Karnataka SGST Amendment in Notification (07/2020) No. FD 03 CSL 2020 (e), dated the 27th March 2020 17/2022-State Tax - dated 5-8-2022 - Mizoram SGST Seeks to implement e-invoicing for the taxpayers having aggregate turnover exceeding Rs. 10 Cr from 01st October, 2022 9/2022-State Tax (Rate) - dated 26-7-2022 - Mizoram SGST Seeks to amend notification No. 5/2017-State Tax (Rate), dated the 7th July, 2017 16/2022-State Tax - dated 26-7-2022 - Mizoram SGST Seeks to amend Notification No. 14/2019-State Tax, dated the 22nd March, 2019 15/2022-State Tax - dated 26-7-2022 - Mizoram SGST Amendment in Notification No. 10/2019- State Tax, dated the 22ndMarch, 2019 11/2022-State Tax (Rate) - dated 26-7-2022 - Mizoram SGST Rescinds notification No.45/2017-State Tax (Rate), dated the 17th November, 2017 10/2022-State Tax (Rate) - dated 26-7-2022 - Mizoram SGST Seeks to amend notification No. 02/2022-State Tax (Rate), dated the 5th April, 2022 Income Tax 96/2022 - dated 17-8-2022 - IT Income-tax (25th Amendment) Rules, 2022 95/2022 - dated 16-8-2022 - IT Specified person u/s 10(23FE) - Central Government specifies the sovereign wealth fund, namely, INQ Holding LLC in respect of the investment made by it in India. Circulars / Instructions / Orders Customs Instruction No. 19/2022 - dated 17-8-2022 Applying CAROTAR maintaining consistency with the provisions of relevant trade agreement or its Rules of Origin 12/2022 - dated 16-8-2022 Guidelines for launching of Prosecution in relation to offences punishable under the Customs Act, 1962 13/2022 - dated 16-8-2022 Revised Guidelines for Arrest and Bail in relation to offences punishable under Customs Act, 1962 Highlights / Catch Notes GST Cancellation of petitioner’s GST registration - non-compliance with the directions of first appellate authority for restoring the registration - It cannot but be accepted that under Rule 25 of the Central Goods and Services Tax Rules, 2017, before carrying out physical inspection, the respondents/revenue are required to serve a notice on the concerned person/entity. However, as noticed above, all this did not form part of the order dated 10.10.2021 - Furthermore, the first appellate authority has given a rationale for revoking the order cancelling the petitioner’s GST registration - there are no good reason not to direct the respondents/revenue to comply with the OIA. - Directions issued to restore the registration as per the order - HC Visit to Get Source Refund of IGST on ocean freight charges with interest - prohibition on respondent authorities from collecting the IGST in terms of N/N. 10 of 2017 - It is directed that if any IGST amount is collected, the same shall be refunded within six weeks alongwith statutory rate of interest - HC Visit to Get Source Profiteering - Construction services - allegation is that the benefit of ITC not passed to customers/flat buyers/recipients, by way of commensurate reduction in the price - As such, the excess of the ITC benefit provided to some of the homebuyers/customers cannot be offset against others to whom less ITC benefit has been provided or no benefit have been provided at all. The Authority finds that the verification as done by the DGAP in terms of this Authority’s Order No. 01/2021 dated 16.03.2021 does not substantiate the submissions and contentions of the Respondent that they have passed on the profiteered amount along with interest to each recipient of supply. - NAPA Visit to Get Source Income Tax Accrual of income - treating of advances received by the assessee from flat buyers as income of the assessee for AY 2006-07 - selection of Project Completion Method or Completed Contract Method - No error in the finding of the Ld. CIT(A) in upholding the Project Completion Method or Completed Contract Method followed by the assessee for declaring income from the project under reference. - AT Visit to Get Source Revision u/s 263 - As per CIT assessee firm has paid interest on unsecured loan of 3 ex-partners but not deducted TDS on the interest amount so paid as per provision of section 194A - the assessee has failed to demonstrate on merits that the view taken by the AO before passing assessment order was a plausible view as being taken after due enquiries on the issue under consideration. Thus, we uphold the finding of the PCITin categorizing the assessment as erroneous so far as prejudicial to the interest of the Revenue - AT Visit to Get Source Nature of expenses - Litigation expenses - Revenue or capital expenditure - In the present facts, since assessee has no interest in the ownership of the asset but he is in possession of the asset for conducting its business, the litigation expenditure incurred is only to protect his business and, therefore, the same is revenue expenditure. Accordingly, the litigation expenditure incurred by the assessee is revenue expenditure and not capital expenditure. - AT Visit to Get Source Disallowance of credit for TDS - Rectification of mistake u/s 154 - As per order u/s 154 dated: 10.08.2018, the tax deductor of the appellant has withdrawn certain tax credits as per Rule 37BA. - Assessee filed her return of income on the basis of record generated by department itself i.e., form no 26AS and form no 16A. The documents which has been processed and issued by the department itself on which assessee relied, how there can be a case of mistake apparent from record. May be there is a mismatch in the data pertaining to assessee and data pertaining to deductor (processed and maintained by department), CPC Bangalore and jurisdictional ITO can’t proceed u/s 154 against the assessee. - - AT Visit to Get Source Reopening of assessment u/s 147 - reliance on information that was received by him from the DDIT - not only the aforesaid details of cash deposits in the bank accounts of the assessee were very much there before the A.O in the course of the original assessment proceedings, but in fact the same had duly been considered and accepted by him as the duly accounted sale proceeds of the assessee. On the basis of our aforesaid deliberations, we are of a strong conviction, that as stated by the Ld. AR, and rightly so, as the case of the assessee had been reopened with a purpose to re-visit the assessment on the basis of a mere change of opinion, which we are afraid is not permissible in the eyes of law - AT Visit to Get Source Disallowance of expenses relatable to medical treatment of one of the Director’s wife - these expenses incurred towards medical expenses of the relative of the Director of the assessee company in foreign currency are personal in nature and not in relation to any business connection. Hence, the lower authorities have rightly disallowed the same and we confirm the same. - AT Visit to Get Source Validity of the issuance of notice u/s. 143(2) - Scope of proper service of notice - notice u/s. 143(2) served through affixture - Since in the instant case, the notice u/s. 143(2) was undisputedly served by affixture at the very first instance and the report of the Inspector does not give the complete details of the witnesses in whose presence such notice was affixed, therefore, we are of the considered opinion that there is no valid service of notice to the assessee before the statutory period for assuming jurisdiction and completing the assessment. Merely because the assessee has participated in the proceedings will not validate the assessment proceedings in absence of service of notice u/s. 143(2) of the I.T. Act and the provisions of section 292BB, in our opinion, cannot come to the rescue of the Revenue for invalid assumption of jurisdiction. - AT Visit to Get Source Nature of expenditure - Disallowance of expenditure under the "head repairs and maintenance"- AO rejected the assessee's contention and held that the assessee is eligible to claim depreciation on the rolling mills @80% and assessee is not eligible to claim deduction thereof as revenue expenditure - the revenue has not been able to independently bring anything on record to substantiate that any enduring benefit accrued to the assessee by way of incurring this expenditure on purchase of Rolling Mill Rolls. - Entire amount allowed as revenue expenditure - AT Visit to Get Source Bogus purchases - purchases managed through accommodation entries - A.O had not controverted the material which was submitted by the assessee during the course of the assessment proceedings, viz. vehicle numbers (which were corrected in the assessment proceeding), bank details, transportation details of trucks, custom clearance details, export sales and domestic sales documents, confirmation from exporters a/w. copies of account, but had chosen to focus more on the modus operandi adopted by the firms/brokers for providing bogus bills/accommodation entries, therefore, in absence of dislodging of the aforesaid supporting documents/materials there was no justification on his part in drawing adverse inferences as regards the authenticity of the purchases in question. - the assessee had made genuine purchases - AT Visit to Get Source Customs Charging enhanced rate of duty on the consignments in question on the basis of the impugned notification No. 103/2020-Customs (N.T.) dated 29th October, 2020 - retrospective effect of notification or not - The action of the respondents customs authority charging at enhanced rate of duty on the goods in question on the basis of the aforesaid E-Gazette Notification dated 29.10.2020 by giving retrospective effect to it, is arbitrary, illegal and not sustainable in law - HC Visit to Get Source Demand of additional fine/ charge/ penalty 5 times of regular fees - The impugned Regulation 14(2) of the Plant Quarantine (Regulation to Import into India) Order, 2003 of Chapter-VI is declared as arbitrary and unreasonable and in violation of fundamental rights guaranteed under Article 19(g) of the Constitution of India to the extent it stipulates charging of fees of five times of normal rates. The same is quashed and set aside to the said extent only - HC Visit to Get Source Benefit under EPCG Scheme denied - The first part of the definition of capital goods uses the term ‘means’. The term ‘means’ is exhaustive in nature and is meant to cover all the items mentioned therein, namely, plant, machinery, equipment or accessories, as ordinarily understood, required for the manufacture or production, either directly or indirectly of goods. Refractory bricks are clearly accessories required for lining of the furnace, and hence indirectly used for manufacture of finished goods by the appellants. The use of the expression ‘ refractories for initial lining’ in the inclusive part of the definition of capital goods does not in any way restrict the meaning of the terms used in the ‘means’ part of the definition. - AT Visit to Get Source Corporate Law Oppression and mismanagement - issuance of 30,000 equity shares by private placements - From the facts of this case, it is clear that Respondent nos. 2 and 3 had allotted shares of Respondent no. 1 Company to either their relatives, or the Companies indirectly controlled by them. This was done without disclosing the full facts - it is a fit case to exercise powers conferred on this Tribunal under sections 397, 398 and 402 of the Companies Act, 1956, or for that matter, under section 241-242 of the Companies Act, 2013. - Tri Visit to Get Source SEBI Payment due for the services rendered to the unitholders prior to the winding up - Even if a distributor renders some services to the unitholders after publication of the notice under Regulation 39(3)(b), it would not entitle him to claim an amount from the asset management company. The Circular dated 22nd October 2018 cannot override the Regulations. The Circular does not intend to do so. It has been issued to bring about transparency in expenses, reduce portfolio churning and mis-selling in mutual fund schemes. The intent behind specifying total expense ratio and the performance disclosure for mutual funds is to bring greater transparency in expenses and to not confer any right on the mutual fund distributors to claim expenses under clause (b) to Regulation 41(2), which pertains to the procedure and manner of winding up. - SC Visit to Get Source Service Tax Nature of activity - sale or service - It is found from the fact on record that the “Shot Firers” are independent and technical expert to carry out the blasting, they are licensed with the Government’s Department of explosives. The revenue has not adduced any evidence to show that the “Shot Firers” were acting as an agent of the appellant. Therefore, the “Shot Firers” job was carried out not on the behalf of the appellant but on behalf of the buyer of the goods - In this fact the entire basis of the revenue that the “Shot Firers” have acted on behalf of the appellant is far from truth. Hence the entire foundation of the case gets demolished. - The activity undoubtedly is of sale of goods. The sale of goods does not attract Service Tax - AT Visit to Get Source Rejection of Refund claim - Whether the service provided by the appellant to GSPHCL is service provided to a governmental authority? - The GSPHCL is a 100% owned by Government of Gujarat therefore, it clearly falls under the category of service provided to government authority - The corporation/board constituted under the act of State Government should be considered as a governmental authority and accordingly, exemption provided to the government or governmental authority is applicable in respect of service provided by a service provider to such board/corporation. - AT Visit to Get Source Levy of Service Tax - Commercial or Industrial construction services provided to Railways - The provisions of Section 65A of Finance Act 1994 provides for classification of taxable services. It is settled law that activity shall be classified of a service which gives a service essential character, as per section 65A ibid as it is applicable. The activity of maintenance, repairs are distinct and separate taxable services listed under Sr. No. 12 of Notification No. 25/2012-ST. Hence, O-I-O is not in accordance with provisions of Finance Act 1994. Sr. No 12 of Notification 25/2012-ST allows exemption in respect of repair and maintenance of a civil structure. Therefore, services of Appellant were to Railways (Western), for Repairs and Maintenance is eligible for the above exemption. - AT Visit to Get Source Time Limitation - Cash Refund of Service Tax paid - Service Tax paid against service to be provided which was not so provided when the advances were returned to the customers - Section 142(5) of the GST Act makes it clear that the claim for refund must be processed notwithstanding anything contrary contained in Section 11B of the Central Excise Act. - Department directed to re-consider the application - HC Visit to Get Source Central Excise Validity and jurisdiction to adjudicate the subsequent SCN - There are no reason to interfere with the impugned judgment and order passed by the High Court - it is directed that, now both the show cause notices one dated 1-3-2016 and the subsequent show cause notice dated 23-10-2017 be adjudicated by only one authority, namely, the Additional Director General, Directorate General of Central Excise Intelligence, Delhi Zonal Unit, New Delhi and/or the equivalent authority, to be decided and disposed of within a period of six months from today. - SC Visit to Get Source Classification of goods - Mis-rolls - The Tribunal in the impugned orders has left open the classification issue. If such be the circumstances, the learned Tribunal ought to have made an endeavour to consider the facts of the case, specially when the allegation in the show cause notice issued by the adjudicating authority was that the assessee does not process furnace for melting such waste and scrap and it is practically impossible for the assessee to manufacture MS Flat/Bar, MS Angle, MS Channel, MS Round etc. from the said items which are various types of scraps. - Allowing the revenue appeal, matter restored back to tribunal - HC Visit to Get Source Reversal of CENVAT Credit - it is the Department who are alleging certain non-observance, of procedures by the appellants and availment of CENVAT Credit in a proper manner, on the part of the appellants. Therefore, it was incumbent upon the Department to prove the same with cogent evidence, reasoned argument and on a legal basis. Having not discharged their onus, the Department cannot simply brush aside the submissions of the appellants. The appellants have reversed the credit attributable to the inputs or inputs services alleged to have been used in the manufacture of exempted goods - the reversal of CENVAT Credit amounts to non-availment of CENVAT Credit and therefore, demands would not sustain. - AT Visit to Get Source Validity of Show Cause notice - Non adjudication / delayed adjustication of SCN for 11 years - HC quashed to SCN stating that no explanation has been offered in the written statement which can be held to be a plausible explanation for not adjudicating upon the Show Cause Notice within the time prescribed. - SC dismissed the revenue's SLP/appeal. Visit to Get Source Case Laws: GST 2022 (8) TMI 690 Validity of writ of mandamus issued - Classification of goods - rate of duty - Procurement Product - to be taxed @ 18% under the Relevant HSN Code, i.e., 84148030, to ensure a Uniform Bidding from the parties or not - whether Writ of Mandamus would lie only when a Statute imposes a duty and there is failure in discharge of duty? - Make in India Order - Reverse Charge Mechanism - HELD THAT:- A Writ of Mandamus or a direction, in the nature of a Writ of Mandamus, is not to be withheld, in the exercise of powers of Article 226 on any technicalities. This is subject only to the indispensable requirements being fulfilled. There must be a public duty. While the duty may, indeed, arise form a Statute ordinarily, the duty can be imposed by common charter, common law, custom or even contract. The fact that a duty may have to be unravelled and the mist around it cleared before its shape is unfolded may not relieve the Court of its duty to cull out a public duty in a Statute or otherwise, if in substance, it exists. Equally, Mandamus would lie if the Authority, which had a discretion, fails to exercise it and prefers to act under dictation of another Authority - A Writ of Mandamus or a direction in the nature thereof had been given a very wide scope in the conditions prevailing in this country and it is to be issued wherever there is a public duty and there is a failure to perform and the courts will not be bound by technicalities and its chief concern should be to reach justice to the wronged. Ambit of the Court s jurisdiction in judicial review in contractual matters - HELD THAT:- It is, undoubtedly, too late in the day to countenance the contention that the mandate of fairness in State action does not extend to the realm of contract entered into by the State - The observations made by the Court, undoubtedly, draw inspiration from factual matrix essentially involved in the culling out of the principle of level playing field, which was found to be impaired on the basis of a lack of legal certainty, as found established by the material available on record. In the course of observations in paragraph-36, this Court held that Article 19(1)(g) confers a Fundamental Right to carry on a business to a company. We would accept it, subject to the caveat that Article 19 confers a right on the citizens, who are natural persons. The High Court, in the impugned Judgment, has correctly noticed the contours of the jurisdiction of courts in the realm of judicial review of action of State in matters relating to contracts. It is correctly found that the Court cannot examine the details of the terms of the contract - Thereafter it poses the question, as to whether the classification of the HSN Code is integral to the tendering process and answers it by holding that it is integral and then founds its interference in the manner done by finding that fair competition or level playing field would be denied to each bidder as someone may bag the tender by quoting the lesser rate of GST, creating a substantial difference in the total price. Undoubtedly, selection is based on aggregating the base price with the tax (GST). If there is lack of clarity, each bidder would be in a position to take a shot at the tender by understating the value of the tax. Section 9 of the Central Act provides for levy of the tax called the Central Goods and Services Tax on all intra-state supply of goods and services, except as provided therein. Section 9(3) provides that the Government, may, on the recommendation of the Council, notify categories of supply of goods or services or both, where the tax is to be levied, assessed and recovered on the reverse charge basis - Section 102 provides for rectification of advance ruling. Section 103 provides that the advance ruling shall be binding on an applicant and on the concerned officer or jurisdictional officer in respect of the applicant. Section 103(1A) inserted by the Finance Act, 2019, amplifies the scope of advance ruling, as provided therein. An advance ruling can become void in certain circumstances, which includes fraud or suppression of material or misrepresentation of facts (see Section 104). Section 105 provides for the powers of the Civil Court under the CPC in respect of discovery and inspection, enforcing attendance of any person and examining him on oath and issuing commission and production of books of account and other records. The purport of the Railway Board is that it is the responsibility of the bidder to quote the correct HSN Number and the corresponding GST rate - The very idea of a discretionary power would suffer annihilation, if it ceases to be discretionary in the hands of a Court ordering a Mandamus. No doubt, there may be cases where the facts are such that the court is not powerless to direct the Authority to do a thing which it considers absolutely necessary and just and legal to perform the act even when the Authority seeks shelter on the basis that what is conferred on it, is a mere discretion. The other terms of the circular clearly appear to indicate that the rate even if indicated by the appellants will not detract from the tenderers quoting the rate which is up to them. It is the rate quoted by the tenderers which governs. It is the same which will be used to carry out the ranking. The other terms also militate against a public duty with the appellants as directed. The appellant seeks to protect its best interest as a player in the commercial field. The clauses are self-evident. Make in India Order - contention of the writ petitioner is that unless the appellant found out the correct HSN Code and also the tax rate applicable for the product, the local content, as defined in the Order, could not be determined - HELD THAT:- When a successful bidder invoices the goods with the GST rate or HSN Number different from that incorporated in the purchase order, payment is to be made at the rate, which is lower of the GST rate, as between what is incorporated in the purchase order or the invoice. It is further made clear in the Circular dated 05.09.2017 that if a higher tax rate is billed and an all-inclusive price is mentioned in the purchase order, then, the basic price would have to be accordingly adjusted to make it in conformity with all-inclusive price - in view of the Make in India policy as contained in the order dated 15.06.2017, there is duty to declare the HSN code in the tender and what is more, make the tenderers quote the rate accordingly. Unless Clause 2.9.2 is done away with (it must be remembered that there is no challenge to Clause 2.9.2), the tenderers would be free to quote a lumpsum rate without including the tax rate. The further and more important obstacle is the mechanism or rather the absence of the same by which the purchaser of goods and services (the appellants) can be compelled to ascertain the correct HSN Code - Circular dated 05.09.2017, issued by the Board, does not provide for the mandatory duty to specify the HSN Code. Other tenders brought out by other units of Railways containing the HSN Code - HELD THAT:- Since the first appellant is the Union of India, we would expect that if it is otherwise permissible to sustain the impugned judgment, it may not be fair to not have a uniform policy in the matter of award of largesse by the various units under it. However, the appellants do point out that even in the tenders which have been brought out, the HSN Code mentioned in the tender is shown as indicative only - the impugned judgment based on the issuance of tenders, cannot be entertained. Reverse Charge Mechanism - HELD THAT:- It is noticed from the tender condition relied upon by the writ petitioner which have been extracted at paragraph 58, what is contemplated is that the amount would be deducted at the applicable GST rate from the bill under the Reverse Charge Mechanism and deposited with the concerned tax authority. If under the terms of the tender, what is contemplated is that, in a case where the tax component is not included or it is included at a lower rate, the appellants are entitled to deduct the actual rate of tax as payable by it under the Reverse Charge Mechanism and the tender of such a person is accepted being the lowest tender, then there can be no question of public interest being prejudiced. If on the other hand, the tax rate is included and the clause provides for deduction of the actual rate from the bill, then also public interest may not be affected. This is all the more reason for the tenderer specifically including the tax component indicating the correct rate of tax. This is a matter where the first appellant can consider giving appropriate instructions. Thus, the appellants have made out a clear case for our interference with the impugned Judgment. There remains, however, one aspect. It is the case of the appellants that the supplier of the goods and services, i.e., the successful tenderer is, indeed, liable to pay the GST by filing returns and carrying out self-assessment - in order to also ensure that the successful tenderer pays the tax due and to further ensure that, by not correctly quoting the GST rate, there is no tax evasion, it is considered necessary to direct that, in all cases, where a contract is awarded by the appellants, a copy of the document, by which, the contract is awarded containing all material details shall be immediately forwarded to the concerned jurisdictional Officer. Appeal allowed. 2022 (8) TMI 689 Cancellation of petitioner s GST registration - Direction of the first appellate authority to restore the registration not complied with - requirement of physical verification of premises - HELD THAT:- It cannot but be accepted that under Rule 25 of the Central Goods and Services Tax Rules, 2017, before carrying out physical inspection, the respondents/revenue are required to serve a notice on the concerned person/entity. However, as noticed above, all this did not form part of the order dated 10.10.2021 - Furthermore, the first appellate authority has given a rationale for revoking the order cancelling the petitioner s GST registration - there are no good reason not to direct the respondents/revenue to comply with the OIA. The respondents/revenue, at this juncture, have no other alternative, but to comply with the order of the first appellate authority, given the fact that they have taken no steps to approach this Court, despite liberty having been given, in that behalf, on 02.06.2022 - the writ petition is disposed of with a direction that the respondents/revenue shall restore the petitioner s GST registration. 2022 (8) TMI 688 Refund of IGST on ocean freight charges with interest - prohibition on respondent authorities from collecting the IGST in terms of N/N. 10 of 2017 - Integrated Tax (Rate) dated 28.6.2017 and N/N. 8 of 2017 Integrated Tax (Rate) of even date read with corrigendum dated 30.6.2017 - HELD THAT:- Notification Nos. 8 of 2017 and 10 of 2017 both dated 28.6.2017 read with corrigendum dated 30.6.2017 came up for consideration for their validity before this court - This court in MOHIT MINERALS PVT LTD VERSUS UNION OF INDIA 1 OTHER [ 2020 (1) TMI 974 - GUJARAT HIGH COURT] held the said notifications to be unconstitutional and ultra vires the statute. The above position and law emanating from the decision of this court in Mohit Minerals Pvt. Ltd. could not be disputed by learned advocates for the respective parties. It is directed that if any IGST amount is collected, the same shall be refunded within six weeks alongwith statutory rate of interest - Petition allowed. 2022 (8) TMI 687 Profiteering - Construction services - allegation is that the benefit of ITC not passed to customers/flat buyers/recipients, by way of commensurate reduction in the price - contravention of provisions of Section 171 of CGST Act - penalty - HELD THAT:- The Authority finds that the Respondent has gained the benefit of ITC on the supply of Construction Services after the implementation of GST w.e.f 01.07.2017 and the Respondent was required to pass on such benefit of ITC to the homebuyers/customers by way of commensurate reduction in prices in tents of Section 171 of the CGST Act, 2017. However, it is observed that the benefit was not commensurately passed on by the Respondent to his recipients. The Authority finds that, provisions of law i.e. Section 171 of the CGST Act, 2017 mentioned herein provide that benefit of the ITC needs to be provided to each and every supply in the commensurate manner. As such, the excess of the ITC benefit provided to some of the homebuyers/customers cannot be offset against others to whom less ITC benefit has been provided or no benefit have been provided at all. The Authority finds that the verification as done by the DGAP in terms of this Authority s Order No. 01/2021 dated 16.03.2021 does not substantiate the submissions and contentions of the Respondent that they have passed on the profiteered amount along with interest to each recipient of supply. The Authority finds that, the DGAP has made all efforts towards verification in terms of the said Order No. 01/2021 dated 16.03.2021 of the Authority, but, the Respondent was unable to provide the requisite evidence which was directed in the said Order. Hence, the Authority determines that the Respondent has profiteered an amount of Rs. 7,90,95,475/- (i.e. Rs. 7,06,20,959/- + Rs. 84,74,515/- i.e. GST thereon). The details of all eligible homebuyers/customers and the amount of the benefit to be passed on to each of them is enclosed as the Annexure-A to this Order. Penalty - HELD THAT:- The Respondent has denied the benefit of ITC to the buyers of his flats in contravention of the provisions of Section 171 (1) of the CGST Act 2017. The Authority holds that the Respondent has committed an offence by violating the provisions of Section 171 (1) during the period from 01.07.2017 to 30.09.2019, and therefore, he is liable for imposition of penalty under the provisions of Section 171 (3A) of the above Act. However, perusal of the provisions of the said Section 171 (3A) shows that it has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from 01.07.2017 to 30.09.2019, when the Respondent had committed the above violation. Hence, the said penalty under Section 171 (3A) cannot be imposed on the Respondent retrospectively. This Order having been passed today falls within the limitation prescribed under Rule 133(1) of the CGST Rules, 2017. Income Tax 2022 (8) TMI 686 Compounding the offence under Section 276 C(1)(i) - pendency of the appeal - HELD THAT:- In view of the aforesaid discussions, submissions made by learned counsel for the parties and the law laid down by Hon'ble Apex Court in the case of Rajesh Kumar Sharma [ 2007 (2) TMI 10 - SUPREME COURT ] and by high Court of Madras in the case of M/s.V.A. Haseeb Co. [ 2016 (9) TMI 756 - MADRAS HIGH COURT ] corroborating with the facts of the case that during the pendency of the appeal, the petitioners were became entitled for compounding the offence as per the law, the revision petition is liable to be and is hereby allowed by setting aside the impugned order. The matter is remitted back to the learned appellate Court concerned to consider the application afresh within a period of two months from the date of this order, in accordance with law without being influenced by this order. 2022 (8) TMI 685 Accrual of income - treating of advances received by the assessee from flat buyers as income of the assessee for AY 2006-07 - selection of Project Completion Method or Completed Contract Method - as per DR advance received against sale of the flat should have been assessed in the year of the receipt as same became income of the assessee on receipt of the said advance - development agreements entered into by the owners of the land and the developer - HELD THAT:- CIT(A) in his detailed finding held that land in question was not transferred to the developer till completion of the construction and therefore entire risk of the project remained with the landowners including the assessee, therefore, he justified in adoption of completed contract method (or Project Completion Method) followed by the assessee. For assessment year 2007-08 and 2008-09 the Ld. CIT(A) has followed his finding in assessment year 2006-07. We further note that that assessee has already paid tax on the advance received against the sale of flat in assessment year 2008-09 and 2009-10. CIT(A) has pointed out that the land in question was treated as a stock in trade by the assessee in its books of accounts and therefore transfer of the same was not liable to be taxed as capital gain. Hon ble Supreme Court in the case of Seshasayee Steal Private Ltd [ 2019 (12) TMI 702 - SUPREME COURT] considered a development agreement granting permission to start advertising, selling and construction and permitted to execuate sale agreement to the developer. The Hon ble Supreme Court held that such permission is not possession under section 53 of the transfer of the property Act. We concur with the finding of the Ld. CIT(A) that possession of land has been handed over to the prospective buyers consequent to the conveyance in favour of co-operative Society of flat owners. The Ld. CIT(A) has further held that the assessee was regularly following accounting method of Completed Contract Method consistently from year to year. The Ld. CIT(A) has further observed that in the case of the developer also Contract Completed Method has been accepted. The Ld. DR has not controverted any of the above factual finding of Ld. CIT(A). No error in the finding of the Ld. CIT(A) in upholding the Project Completion Method or Completed Contract Method followed by the assessee for declaring income from the project under reference. The grounds of the appeal of the revenue in all the three years are accordingly dismissed. 2022 (8) TMI 684 Disallowance of Sales Promotion Expenses - allowable expenditure u/s. 37 - assessee assailed the assessment on legal grounds by submitting that in the absence of any incriminating material as found during the course of search, no such addition could be made - HELD THAT:- The payments were made with the knowledge of the assessee on monthly basis. Besides this, the assessee has paid incentive to its own sales force also. The incentive was paid on secondary sales on monthly basis to depot managers / retail outlet employees of Tasmac on the basis of category of brand. The scheme is stated to have covered all the 42 depots throughout Tamil Nadu. It also emerges that all such payments are made in cash since the cash was handed over to head of marketing department who, in turn, would hand over the cash to Area sales officers which is thereafter paid to depots managers / retail employees based on targets fixed by the assessee. The monthly expenditure was stated to be in the range of Rs.20 Lacs to Rs.25 Lacs. The incentive paid to own sales force was stated to be in the range of Rs.1 Lac per month. The only explanation adduced was that these payments were made as per trade practices notwithstanding the facts that the same were paid in gross violation of provisions of Sec.40A(3) and also in violation of TDS provisions which mandate tax deduction at source on such payment. The argument that these were mere reimbursements could not be accepted in the light of the fact that such payments constitute expenditure for the assessee and has been debited in the Profit Loss Account. Another argument that there was increase in turnover would also not be relevant, in this regard. In another statement recorded during the course of assessment proceedings, the position as aforesaid was maintained. The statement of Area Sales Manager further confirmed the modus operandi of such payments. The argument that these were mere reimbursements could not be accepted in the light of the fact that such payments constitute expenditure for the assessee and has been debited in the Profit Loss Account. Another argument that there was increase in turnover would also not be relevant, in this regard. In another statement recorded during the course of assessment proceedings, the position as aforesaid was maintained. The statement of Area Sales Manager further confirmed the modus operandi of such payments. Proceeding further, it could also be noted that the assessee is not able to identify the payees of such payments. No details of payees could be submitted and the quantification of the expenditure remained elusive. Nothing was shown that the payments so made were offered to tax by the payees thereof. The only supporting document given by the assessee was self-made vouchers without their being any supporting third-party vouchers. The assessment order framed by Ld. AO, on this issue and as confirmed by CIT(A) could not be faulted with. It could be well said that the expenditure was not laid out exclusively and wholly for the purpose of business. The explanation to Sec.37(1) was certainly applicable to the case of the assessee since the payments made to Tasmac employees would not be allowable since it is a Public Sector Undertaking of State of Tamil Nadu. The payment so made would not be allowed in terms of explanation to Sec. 37(1). The code of conduct of Tasmac clearly prohibits this kind of payment. This binds both the streams i.e. i.e., persons on the pay roll of assessee as well as Tasmac and private parties including Tasmac bars, suppliers and contractors etc. We concur with the observations made by Ld. AO as well as CIT(A) in their respective orders. A narrow interpretation of Explanation 1 to section 37(1) defeats the purpose for which it was inserted, i.e., to disallow an assessee from claiming a tax benefit for its participation in an illegal activity. It is also held that a settled principle of law is that no court will lend its aid to a party that roots its cause of action in an immoral or illegal act (ex dolo malo non oritur action) meaning that none should be allowed to profit from any wrongdoing coupled with the fact that statutory regimes should be coherent and not self-defeating. Therefore, denial of the tax benefit cannot be construed as penalizing the assessee pharmaceutical company. Only its participation in what is plainly an action prohibited by law, precludes the assessee from claiming it as a deductible expenditure. Further, one arm of the law cannot be utilized to defeat the other arm of law - doing so would be opposed to public policy and bring the law into ridicule. It will be against public policy to allow the benefit of deduction under one statute of any expenditure incurred in violation of the provisions of another statute or any penalty imposed under another statute. Finally, the expenditure as claimed by the assessee was held to be not deductible. We are of the considered opinion that the ratio of this decision squarely applies to the facts of present case before us. So far as the legality of quantum additions is concerned, we find that incriminating material was found during the course of search operations. A huge difference in cash as per books and physical cash was noted and the statement of a responsible representative was recorded which has been maintained all along. Therefore, it could not be said that the additions were not based on incriminating material found during the course of search. Computation of Short-Term Capital Gains and penal interest for belated tax payments - CIT(A) has deleted the disallowance on the ground that this addition was not based on any incriminating material found during the course of search action - HELD THAT:- We find that the assessee was searched on 11.05.2012. The return of income filed by the assessee on 13.10.2008 was already scrutinized u/s 143(3) on 31.12.2010. Evidently, no proceedings were pending against the assessee and this year was not abated assessment year. It is also a fact that both these additions are not based on any incriminating material found during the search operations. Therefore, no infirmity could be found in the impugned order considering the ratio of decision in CIT V/s Continental Warehousing Corporation [ 2015 (5) TMI 656 - BOMBAY HIGH COURT] wherein it was held that unless any incriminating material was unearthed, no additions could be sustained in the hands of the assessee. The other case laws as enumerated in the impugned order also support this proposition. Therefore, the corresponding grounds raised by the revenue stand dismissed. The revenue s appeal stands dismissed. 2022 (8) TMI 683 Revision u/s 263 - As per CIT assessee firm has paid interest on unsecured loan of 3 ex-partners but not deducted TDS on the interest amount so paid as per provision of section 194A - AO has not examined that interest paid by assessee firm to its partner on their capital balance relating to the period both before retirement and after retirement without deduction of tax at source is disallowable u/s 40(a)(ia) - HELD THAT:- PCIT has observed that the amount of interest on which no deduction of tax was made is liable to be disallowed and therefore, the submission put forth by the assessee is rightly rejected by the Ld. PCIT. However, he objected the decision of set a siding the passement the assessment order by holding it to be erroneous so far as prejudicial to the interest of revenue under clause (a) (b) of Explanation 2 to section 263 as being not applicable to the facts of the present case in as much as assessee has furnished the certificate of CA under first proviso to section 201(1) of the Act which is a part of the record and therefore, section 40(a)(ia) is not convincing primarily, it was not before either the AO or the Ld. PCIT and secondly in the revision proceedings, the assessee shall get an opportunity to produce the material documentary evidence with certification of third parties if any required including CA s certificate which would not cause any prejudice to the assessee. The assessee in proceedings before learned CIT u/s 263 of the Act and also before us, failed to demonstrate that all the facts were before the AO and how the AO has taken a conscious decision on merits which is a plausible decision which does not warrant interference u/s 263 of the Act to revise concluded assessment. We have also considered all the replies given by the assessee on merits before AO and CIT as well before us. We find that the assessee has failed to demonstrate on merits that the view taken by the AO before passing assessment order was a plausible view as being taken after due enquiries on the issue under consideration. Thus, we uphold the finding of the PCIT in categorizing the assessment as erroneous so far as prejudicial to the interest of the Revenue and as such order of the ld. PCIT passed u/s 263 of the act is sustained. - Decided against assessee. 2022 (8) TMI 682 Nature of expenses - Litigation expenses - payment was made to perfect a title or for getting rid of defect in the title or against the threat of litigation - revenue or capital expenditure - CIT(A) has treated the expenditure as capital expenditure for the reason that the details of expenses have not been furnished, the nature of expenditure is different from the earlier years and the outcome of litigation its present status is not known - HELD THAT:- Expenditure has been incurred not to acquire or improve or extend or possession or removing defect in the title of fixed assets in as much as assessee was not the owner of such asset - When litigation expenditure is incurred to protect the business, the same is revenue expenditure. In the present facts, since assessee has no interest in the ownership of the asset but he is in possession of the asset for conducting its business, the litigation expenditure incurred is only to protect his business and, therefore, the same is revenue expenditure. Accordingly, the litigation expenditure incurred by the assessee is revenue expenditure and not capital expenditure. Hence we allow the expenditure incurred as revenue expenditure. Interest on refund as per section 244A - HELD THAT:- Refund was granted to the assessee on 11.06.2020. The ld. A/R submitted that as per section 244A where refund of any amount becomes due to the assessee, he is entitled to receive simple interest thereon from 1st day of April, of the assessment year to the date on which refund is granted. Simply calculating the interest till the month on which intimation under section 143(1) is issued do not amount to grant of refund. Refund is granted when the amount is actually paid to the assessee. In the case of the assessee, the refund was actually paid to the assessee on 11.06.2020. Therefore, the assessee is eligible for interest under section 244A from April, 2018 to June, 2020 i.e. for 27 months and not from April, 2018 to November, 2019 i.e. 20 months - we direct the AO to allow interest to the assessee upto the actual date of refund i.e. upto 11.06.2020. The matter is restored to the file of the AO. 2022 (8) TMI 681 Claim of set off of brought forward losses - Whether provisions of section 72A will override the applicability of the provisions of section 79? - Whether business loss becomes eligible for the set off ? - AO held that the business loss incurred prior to the previous year 2005-06 is not eligible for carry forward due to the applicability of provisions of section 79 and therefore, no such loss was available to the assessee for set off against its profits in AY 2007-08 - HELD THAT:- Once the AO in the case of Kovalam Hotels Ltd for assessment year 2006-07 has already rejected claim of carry forward of the said business loss in terms of section 79 of the Act, then same cannot be available to the assessee for set off u/s 72A of the Act until and unless said finding of the AO is reversed by the higher appellate authorities. Assessee intimated that appeal against the order of the AO in the case of Kovalam Hotels Ltd. for AY 2006-07 is pending before the Ld. First Appellate Authority. In our considered view, the said business loss becomes eligible for the set off in the year under consideration only subsequent to decision of the allowability of carry-forward in the case of Kovalam Hotel Ltd. under section 79 of the Act in the favour of assessee. As on date, the assessment order in the case of Kovalam Hotels Ltd. for AY 2006-07 is in operation and which has not been reversed by the CIT(A) or ITAT, thus, said business loss has not been carry forwarded to assessment year 2007-08 and therefore same is not available for set off against different heads of the income of the assessee as per the provisions of section 72A the Act for the assessment year under consideration. The issue of set off of business loss in AY 2007-08 u/s 72A of the Act is consequent to the issue of carry forward of loss in AY 2006-07 in Kovalam Hotels Ltd. in terms of section 79 - CIT(A) in the year under consideration is not justified in deciding the question of carryforward of loss in the case of Kovalam Hotels Ltd. for assessment year 2006-07 invoking section 72A of the Act as that issue has to be adjudicated by the appellate authorities having jurisdiction over the case of Kovalam Hotels Ltd. for AY 2006-07. Therefore, we are also not adjudicating on the issue whether carry-forward of the said business loss in the case of Kovalam Hotels Ltd. for AY 2006-07 is permitted under the law. Accordingly, we set aside the finding of the Ld. CIT(A) on the issue in dispute. The Assessing Officer is directed to give effect of set off of business loss in the case of the assessee, consequent to the finding of appellate authorities in the case of Kovalam Hotels Ltd. on the issue of carry forward of business loss under reference. The ground of the appeal of the Revenue is accordingly allowed. 2022 (8) TMI 680 Assessment u/s 153A - Deduction u/s 80IA - whether any incriminating was found in any particular order and all of the relevant years? - HELD THAT:- We observe that for assessment year 2005-06, return of income was filed on 31-10-2005 declaring total income wherein deduction u/s 80-IA has been claimed. The regular assessment for the captioned year was also completed on 31-12-2007. Subsequently, a search action under section 132 of the Act was carried out at the premises of the assessee company and on 24-05-2010, disallowing the deduction claimed under section 80IA(4) - From the facts placed on record, we observe that there was no incriminating material found during the course of search on the basis of which deduction claimed under section 80IA(4) was disallowed by the Ld. Assessing Officer and also confirmed by Ld. CIT(Appeals). Similarly, for assessment year 2006-07, return of income was filed on 13-11-2006 declaring total income wherein deduction u/s 80-IA of Rs. 2,62,16,961/- has been claimed. The regular assessment for the captioned year was also completed on 22-12-2008. Subsequently, a search action under section 132 of the Act was carried out at the premises of the assessee company and on 24-05-2010, disallowing the deduction claimed under section 80IA(4)-. From the facts placed on record, we observe that there was no incriminating material found during the course of search on the basis of which deduction claimed under section 80IA(4) was disallowed by the Ld. Assessing Officer and also confirmed by Ld. CIT(Appeals). The Department has not been able to produce any material to suggest / substantiate that the assessment order was passed on the basis of any incriminating material found during the course of search. Therefore, in view of well settled proposition of law that completed assessment can be interfered by the Assessing Officer while making assessment u/s. 153A only on the basis of some incriminating material unearthed during the course of search documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made in the course of original assessment, we are of the considered view that in the instant facts, the Ld. CIT(A) has erred in facts and in law in upholding the additions for assessment years 2005-06 and 2006-07. Since we have set aside the assessment order on the issue of jurisdiction itself, we are not separately discussing the merits of the case. 2022 (8) TMI 679 Disallowance of credit for TDS - jurisdiction of AO to rectify the mistake u/s 154 - tax deductor has withdrawn certain TDS and revised its TDS return - CIT (A) as relying on the statement mentioned in the order u/s. 154 that the taxes deducted earlier in the name of the appellant have been withdrawn by the deductor - assessee received a rectification order u/s 154 wherein TDS credit was disallowed and consequential interest u/s 234B and 234C respectively also charged - HELD THAT:- It is nowhere from the record established that on what basis CPC Bangalore and jurisdictional ITO ward-35(1) (5), reduced the claim of the assessee from Rs 4, 53,605/- to Rs 39,605/-. It is further noted that the proceedings u/s 154 can be done only in the cases where there is a mistake apparent from record and no debatable issue is involved in this case the record before us clearly established that there is no mistake apparent from record as far as assessee is concerned. Department nowhere able to establish the fact as observed by the Ld. CIT (A) in his order The credit for TDS is governed by the provisions of section 199 of the Act read with Rule 37BA of the Income Tax Rules, 1962. As per order u/s 154 dated: 10.08.2018, the tax deductor of the appellant has withdrawn certain tax credits as per Rule 37BA. In view of the fact that the taxes deducted earlier in the name of the appellant have been withdrawn by the deductor, only the tax credits which have not been withdrawn and those appearing in the claims of the appellant are allowed by the assessing officer in the case of the appellant. In view of the above facts and circumstances, I do not see any reason to interfere in the order of the AO, the appeals of the appellant are not allowed. This observation challenges even the jurisdiction of CPC Bangalore and jurisdictional ITO ward-35(1)(5). Assessee filed her return of income on the basis of record generated by department itself i.e., form no 26AS and form no 16A. The documents which has been processed and issued by the department itself on which assessee relied, how there can be a case of mistake apparent from record. May be there is a mismatch in the data pertaining to assessee and data pertaining to deductor (processed and maintained by department), CPC Bangalore and jurisdictional ITO can t proceed u/s 154 against the assessee. We declare this whole action of CPC Bangalore and in turn jurisdictional ITO is bad in law hence set aside with a consequential direction to give full credit of TDS claim by the assessee and any other money she deposited during this period. Appeal of the assessee is fully allowed with consequential relief in terms of reversal of interest charged u/s 234B and 234C with immediate grant of refund if any with consequential interest. 2022 (8) TMI 678 Reopening of assessment u/s 147 - reliance on information that was received by him from the DDIT - unexplained cash deposits in the various bank accounts of the assessee - Whether reopening of case was without application of mind by the A.O? - HELD THAT:- As per mandate of law, the A.O on the basis of the material available before him is obligated to record a bonafide belief that the income of the assessee chargeable to tax had escaped assessment. However, in transpires that in the case before us, through the A.O had referred to the material/information but there is a clear absence of formation of a bonafide belief on his part that the income of the assessee chargeable to tax had escaped assessment within the meaning of section 147 of the Act. We would not hesitate to observe that a perusal of the reasons to believe reveals nothing but the reopening of the case of assessee on the basis of information received by the A.O from the DDIT(Inv.)-III, Raipur. Nothing is discernible from a perusal of the reasons to believe which would reveal any application of mind by the AO qua the material/information before him, on the basis of which he had arrived at a bonafide belief that the income of the assessee chargeable to tax had escaped assessment u/s.147. We though are not oblivious of the settled position of law that an A.O at the stage of reopening of a concluded assessment u/s. 147 of the Act is not required to conclusively prove escapement of income of the assessee from chargeability to tax, but the statutory obligation so cast upon him i.e. formation of bona-fide belief on the basis of material available before him that the income of the assessee chargeable to tax had escaped assessment cannot be lost sight of. Our aforesaid view is fortified by the order of a co-ordinate Bench of the Tribunal i.e. ITAT, C Bench, Mumbai in the case of Chetan Rajnikant Shah [ 2021 (2) TMI 1053 - ITAT MUMBAI] wherein quashed the reopening of the assessment, for the reason that there was failure on the part of the assessee to arrive at an independent and a bonafide belief that the income of the assessee chargeable to tax had escaped assessment, As the A.O in the case before us had clearly failed to apply his mind to the material available before him, and had reopened the case of the assessee by merely referring to the information that was received by him from the DDIT (Inv.)-III, Raipur, therefore, we concur with the claim of the Ld. AR that the A.O had wrongly assumed jurisdiction for dislodging the concluded assessment of the assessee without discharging the statutory obligation that was cast upon him for validly reopening the case of the assessee u/s.147 of the Act. Reopening of the assessment in absence of any failure on the part of the assessee in fully and truly disclosing all material facts necessary for assessment - As the assessee in the case before us had disclosed all material facts necessary for its assessment, therefore, we are of the considered view that the A.O as per the limitation provided in the first proviso to Sec. 147 was divested of his jurisdiction for reopening the concluded assessment of the assessee beyond a period of four years from the end of the relevant assessment year i.e, AY 2008-09. As in the case before us the original assessment had been framed by the A.O vide his order passed u/s.143(3), dated 18.06.2010 therefore, in absence of any allegation on the part of the department that the income of the assessee chargeable to tax had escaped assessment for reason of failure on his part to disclose fully and truly all material facts necessary for assessment, the A.O as per the mandate of the first proviso to Sec. 147 of the Act could not have assumed jurisdiction for reopening the concluded assessment of the assessee beyond a period of four years from the end of the assessment year i.e, beyond 31.03.2013. We, thus, concur with the claim of the Ld. AR that as the A.O had acted in defiance of the first proviso to Sec. 147 of the Act and had wrongly assumed jurisdiction and reopened the case of the assessee beyond a period of 4 years from the end of the relevant assessment year, therefore, the assessment order so passed by him on the said count too cannot be sustained and is liable to be struck down. Reassessment on the basis of Change of opinion - On a perusal of the reasons to believe , it can safely be gathered that the case of the assessee was reopened by the AO on the basis of information received from the DDIT (Inv.)-II, Raipur that certain cash deposits in the bank accounts of the assessee could not be verified. In our considered view, not only the aforesaid details of cash deposits in the bank accounts of the assessee were very much there before the A.O in the course of the original assessment proceedings, but in fact the same had duly been considered and accepted by him as the duly accounted sale proceeds of the assessee. On the basis of our aforesaid deliberations, we are of a strong conviction, that as stated by the Ld. AR, and rightly so, as the case of the assessee had been reopened with a purpose to re-visit the assessment on the basis of a mere change of opinion, which we are afraid is not permissible in the eyes of law, thus, the assessment framed by the AO is liable to be struck down for want of jurisdiction on his part on the said count. As per the mandate of law even where a concluded assessment is sought to be reopened by the A.O within a period of 4 years from the end of the relevant assessment year, it is must that the A.O has fresh material or information with him that had led to the formation of belief on his part that the income of the assessee chargeable to tax has escaped assessment. Our aforesaid view is fortified by the judgments of the Hon'ble High Court of Bombay in the case of NYK Lime (India) Ltd. [ 2012 (2) TMI 283 - BOMBAY HIGH COURT] and Purity Tech Textile Pvt. Ltd. [ 2010 (2) TMI 26 - BOMBAY HIGH COURT] . We, thus, in the backdrop of our aforesaid multi-facet observations qua the invalid assumption of jurisdiction by the AO for reopening the concluded assessment of the assessee, quash the assessment framed by him vide his order passed u/ss. 143(3)/147 of the Act, dated 15.03.2016 for want of valid assumption of jurisdiction. Unexplained cash credit u/s.68 -Though the A.O had on the one hand accepted that the amounts in question were the sale proceeds that stood credited in the books of account of the assessee and had brought the profit resulting therefrom as disclosed by the assessee to tax in his hand, but at the same time had held the said amounts as unexplained cash credits within the meaning of section 68 of the Act. Apart from that, the re-characterization of the duly accounted sales of the assessee which were earlier accepted by the AO in the original assessment that was framed by him vide his order passed under Sec. 143(3), dated 18.06.2010, without rejecting his books of accounts under Sec. 145(3) of the Act is beyond comprehension. In sum and substance, the recharacterisation of the duly accounted cash sales of the assessee as unexplained cash credits u/s 68 by the AO without rejection of the books of account of the assessee u/s 145(3) of the Act is beyond comprehension. As stated by the ld. AR, and rightly so, the acceptance of the cash sales as disclosed by the assessee a/w simultaneous re-characterization of the same as unexplained cash credits u/s 68 had clearly subjected the assessee to a double tax jeopardy. Apart from that, we find substance in the claim of the ld. AR that now when in the cases of the assessee for the subsequent years i.e AY 2009-10, AY 2010-11, AY 2013-14 and AY 2014-15, which too were reopened for the same reasons that were communicated to the AO by the DDIT (Inv.)-II, Raipur, no adverse inferences have been drawn, therefore, an inconsistent approach could not have justifiably been adopted for the year under consideration. We find that the AO had accepted the claim of the assessee that the cash deposits in his bank accounts were sourced out of the duly accounted cash sale proceeds. As the facts and the issue involved in the aforementioned succeeding years remains the same as are involved in the case of the assessee before us, therefore, we find no justification on the part of the department in adopting an inconsistent approach. Our aforesaid view is fortified by the judgment of the Hon ble Supreme Court in the case of Radhasoami Satsang [ 1991 (11) TMI 2 - SUPREME COURT] We, thus, in terms of our aforesaid observations finding no infirmity in the deletion of the addition made by the AO u/s 68 of the Act, uphold his well reasoned order. Decided against revenue. 2022 (8) TMI 677 Income accrued in India - Royalty receipt - Consideration received by the assessee on account of providing Norton security - India-Singapore DTAA - use of the computer software by the end users together with or without technical support taxable under section 9(1)(vi) of the Act as well as DTAA - HELD THAT:- It is an admitted position that the facts and circumstances of the assessee s case in AY 2015-16 remain the same as in immediately preceding years for AY 2014-15 [ 2021 (4) TMI 645 - ITAT DELHI ] and the Revenue has accepted Nil income returned by the assessee in AY 2018-19 and 2019-20 following the decision of the Hon ble Supreme Court in Engineering Analysis Centre of Excellence (P) Ltd. [ 2021 (3) TMI 138 - SUPREME COURT ] Hence, the dispute between the Revenue and the assessee no longer survives. In this view of the matter, we do not find any substance in the appeal of the Revenue as the decision of Hon ble Delhi High Court in DIT vs. Infrasoft Ltd. [ 2013 (11) TMI 1382 - DELHI HIGH COURT ] has been approved by the Hon ble Supreme Court in Engineering Analysis Centre of Excellence (P) Ltd. (supra). Therefore, we reject the appeal of the Revenue and allow the appeal of the assessee. 2022 (8) TMI 676 Revision u/s 263 - CIT directing the AO to examine the sale of land, invoking the provisions of Section 50C - HELD THAT:- It is seen from the sale deed executed on 30.05.2011, the entire consideration were being made through cheque payments. However, as it can been seen from the other co-owners assessment orders, the Income Tax Department has accepted the returned income filed by the respective assessee and has not adopted section 50C valuation for the other co-owners namely Smt. Hiraben Shantilal and Smt. Indiraben Shantilal as can been seen from the reassessment orders passed u/s. 143(3) r.w.s. 147 dated 30.12.2019. There cannot be two different yardsticks for the same set of sale transaction made by five co-owners. We have no hesitation in holding that different treatments cannot be given on the same set of facts in respect of different co-owners of a common piece of land which are subjected to capital gains. If such action on the part of Revision Authority is approved, it would militate against the principle of equality of law as enshrined in the Article 14 of the Constitution of India. Further, it is seen that the ld.CIT has not taken any steps for reopening the case of other co-owners viz. Smt. Hiraben Shantilal and Smt. Indiraben Shantilal and thereby accepted similar long term capital gain and on the said transaction. Therefore, in our considered view, the assessee cannot be treated differently for similar transaction - assessment order passed u/s. 143(3) r.w.s. 263 is hereby quashed. Appeal of assessee allowed. 2022 (8) TMI 675 Revision u/s 263 by CIT - Whether valid assessment order is existed? - HELD THAT:- The assessment order passed under section 143(3) dated 26.03.2013 attained finality. No seized material was found during the course of search with respect to 2010-11. Hence, ITAT has held that in the absence of any seized material, the assessment order passed on 26.03.2013 would not abate. The income of the assessee could be re-examined qua those aspects for which incriminating material was found and seized. Since there was no material with respect to this year, the same item of income cannot be re-appreciated. ITAT has quashed the assessment. We have reproduced the finding recorded by the Tribunal in the appeal against the assessment order passed under section 153A read with section 143(3). The action under section 263 can only be taken if a valid assessment order is existed. Once the foundation has extinguished, there cannot be any order on the basis of assessment proceeding. Therefore, we allow this appeal and quash the impugned order passed by the ld. Commissioner. Decided in favour of assessee. 2022 (8) TMI 674 Personal expenditure - Disallowance of expenses relatable to medical treatment of one of the Director s wife - allowable revenue expenses or not? - HELD THAT:- Issue decided against assessee as in its own case [ 2022 (8) TMI 595 - ITAT CHENNAI] wherein held that there should be expectation by the employee for payment of medical expenses. The sum of money was expended on the ground of commercial expediency and in order to facilitate indirectly the carrying on of the business of the assessee. If any one of the tests was not satisfied that medical expenditure incurred on by an employee should not be allowed as a valid business expenditure in the hands of the assessee under section 37 - Based upon the above points, the High court held that the expenditure in connection with the payment of Medical expenses met out by the company even though, the same had been spelt out in the letter of appointment cannot be regarded as sufficient for treating the expenditure as business expenditure. In view of the above decision of the Hon ble Madras High Court in the case of CIT v. TIAM House Service Ltd [ 1998 (11) TMI 45 - MADRAS HIGH COURT] wherein, the decision of the Hon ble Supreme Court was followed. We are of the view that these expenses incurred towards medical expenses of the relative of the Director of the assessee company in foreign currency are personal in nature and not in relation to any business connection. Hence, the lower authorities have rightly disallowed the same and we confirm the same. - Decided in favour of revenue. 2022 (8) TMI 673 Validity of the issuance of notice u/s. 143(2) - Scope of proper service of notice - notice u/s. 143(2) served through affixture - jurisdiction of the Assessing Officer was transferred - HELD THAT:- We find the AO in the present case has served the notice u/s. 143(2) of the Act through affixture at the very first instance. A perusal of the order sheet entries shows that the notice was put up for service before the Assessing Officer on 23.9.2013. However, the Revenue in its submission has mentioned that the notice was issued on 29.3.2013 and thereafter it was allegedly served by way of affixture on 30.09.2013. A perusal of the service report of the Inspector Smt. T. Mary Ratna Kumari clearly shows that neither the names of the witnesses nor their complete identity were provided in the service report. It is essential as per CPC to give the name and addresses of the witness/s in whose presence notice was allegedly affixed by the Inspector, and the witnesses had in fact identified the premises and assessee. In the absence of these details and complete address of the independent witnesses, resorting to the alternative mode of service of notice by the Assessing Officer at the very first instance makes the service of notice doubtful and does not inspire confidence. There is another reason to record a finding that the notice has neither been issued nor served on the assessee even by way of affixture. From the reading of order sheet, it is clear that attempt was made to serve the notice on the assessee at the address given in the ROI. In the Return of Income for the A.Y. 2012-13, the address given by the assessee was Shri Sridhar Reddy Jagan Nagari Satya, 1-5-5913, Old Alwal, Select Theatre Road, Hyderabad which is different from the address given in the service report mentioning that notice was served by affixture. In our considered opinion, there is contradiction in the report of the Inspector of the Revenue and the order sheet entry recorded by the Assessing Officer. There is yet another reason namely that the jurisdiction of the Assessing Officer was transferred and it was transferred to ITO Ward-11(1) Hyderabad from ITO ward 11(2) Hyderabad. As a matter of fact, Assessing Officer circle 11(1) again issued notice u/s. 143(2) on 22.10.2013 and also on 10.07.2014. Again, notice dated 22.10.2013 and 10.7.2014 were issued at the address 2-4-96/1 Nacharam but there is no service of these two notices on the file of the Assessing Officer. There was no requirement of law to issue 2nd notice u/s. 143(2) as has been done in the present case on 22.10.2013 and 10.7.2014. Further as per law notice u/s. 143(2) is required to be served within a period of 6 months from the end of the financial year in which the return is furnished. In the present case as is clear no notice was served on the assessee within six months of issuance of notice from the end of financial year i.e. before 30.09.2013. In our considered opinion, the Assessing Officer has resorted to affixture of notice by the Ward Inspector on 30.9.2013. The reading of the content of the subsequent notice 22.10.2013 clearly shows that the return of income was filed by the assessee on 30.09.2012 for the A.Y. 2012-13 but there was no reference of earlier notice, if any, issued by the Assessing Officer for fixing the date of hearing as 15.10.2013 or nonappearance of assessee on 15.10.2013 despite service of notice on 30.9.2013. Since in the instant case, the notice u/s. 143(2) was undisputedly served by affixture at the very first instance and the report of the Inspector does not give the complete details of the witnesses in whose presence such notice was affixed, therefore, we are of the considered opinion that there is no valid service of notice to the assessee before the statutory period for assuming jurisdiction and completing the assessment. Merely because the assessee has participated in the proceedings will not validate the assessment proceedings in absence of service of notice u/s. 143(2) of the I.T. Act and the provisions of section 292BB, in our opinion, cannot come to the rescue of the Revenue for invalid assumption of jurisdiction. In this view of matter, we hold that the entire assessment proceedings are void ab initio, invalid, bad in law and therefore, are to be quashed. Accordingly, we quash the assessment proceedings and allow the appeal filed by the assessee. 2022 (8) TMI 672 Late payment of EFP - EPF collected from Employees and remitted beyond the due date prescribed under the relevant Act - EPFO'S Withdraws Grace Period of 5 Days for Depositing the Dues from February, 2016 - HELD THAT:- As it can be seen from the assessment order passed by the A.O., there is no discussion about why the disallowance of late payment of EFP by the AO but simply disallowed relying upon Column 20(b) of the Audit Report field by the assessee. Similarly, the ld. CIT(A) has not given proper opportunity of explaining the assessee's case but simply followed the jurisdictional High Court judgment and confirmed the addition. Taking into note of the Press release passed by Ministry of Labour Employment dated 12/01/2016 wherein the concession of grace period of 5 days available to the employers for depositing the contribution and other dues, we deem it fit that the matter may be remitted back to the file of the Assessing Officer for the limited purpose of verifying the payments made by the assessee. With this observation, the appeal filed by the Assessee is allowed. 2022 (8) TMI 671 Nature of expenditure - Disallowance of expenditure under the head repairs and maintenance - AO rejected the assessee's contention and held that the assessee is eligible to claim depreciation on the rolling mills @80% and assessee is not eligible to claim deduction thereof as revenue expenditure - Whether replacement of parts of an existing machinery in the course of their working will be a revenue expenditure? - assessee company is engaged in manufacturing of steel products - HELD THAT:- In view of the consistent position taken by various Courts/Tribunals, we are of the considered view that the assessee in the instant set of facts is eligible to claim deduction of expenditure on purchase of Rolling Mill Rolls as revenue expenditure. The only reason why the claim of a revenue expenditure of the assessee was sought to be disallowed was that since the Income Tax Act specified rate of 80% for claim of depreciation in respect of the above assets, the assessee was not eligible to claim the same as revenue expenditure. We note that in the instant set of facts, the revenue has not been able to independently bring anything on record to substantiate that any enduring benefit accrued to the assessee by way of incurring this expenditure on purchase of Rolling Mill Rolls. Accordingly, in our considered view, in the instant set of facts assessee is eligible to claim deduction of expenses as revenue expenditure. In the result, ground of the assessee's appeal is allowed. 2022 (8) TMI 670 Set off of Brought Forward Unabsorbed Business Losses (Other than Speculation Loss) against the Speculation Business Income of the Current Year - HELD THAT:- Assessee has justified set-off of brought forward business losses against speculation business income of the year contending that it is in accordance with law as prescribed by section 72(1) of the Act. The contention of assessee that unabsorbed business losses can be set off against any income from business, be it speculative or otherwise, is correct. Section 72(1)(i) clearly states so. There is nothing in the section denying setoff of unabsorbed brought forward business losses from speculative business income. As per section 72(1)(i) the assessee is clearly entitled to claim the set off of the unabsorbed business losses from speculation business income of the impugned year. The claim of the assessee therefore, we hold, in accordance with law. We fail to understand how the decision of Hon'ble Delhi High Court in the case of DLF Commercials [ 2013 (7) TMI 334 - DELHI HIGH COURT] relied upon by the AO to deny set off of brought forward losses from speculative income of the year, helps the case of the Revenue. The findings in the said case, reproduced in the order of the AO are in relation to section 73 of the Act, which deal with carry forward and set off of speculative losses, which is not the fact in the present case where set off of business losses is in dispute and there is speculative income and not speculative losses at all. In view of the above the claim of set off of brought forward business losses against current years speculative business income is held to be in accordance with law. And the AO is directed to allow the same to the assessee. Addition u/s 68 - unexplained loans taken - HELD THAT:- Out of total unsecured loan taken by the assessee to the tune of Rs. 35,98,244/- all was found genuine except this very small amount of Rs. 18,000/-, and noting the fact that the assessee had given all cooperation to the Revenue in this regard pointing out that notice under section 133(6) of the Act had been sent in incorrect name of the depositor, had pointed out the correct name of the depositor and also sought to serve of the notice by the assessee himself, but none of the request of the assessee was acceded to by the Revenue we see no reason to uphold the addition. The assessee having admittedly proved genuineness of 99.5% of the unsecured loans taken and with regard to this small deposit of Rs. 18,000/-, had given an explanation for non-service of notice under section 133(6), and had offered all cooperation in getting its confirmation, the said loan can also be safely said to be genuine and cannot be doubted for the mere reason that no confirmation was forthcoming of the same. Thus we see no reason to hold the impugned unsecured loan of Rs. 18,000/- as unexplained - Decided in favour of assessee. 2022 (8) TMI 669 Bogus purchases - purchases managed through accommodation entries - recharacterization of the duly accounted sales of the assessee as unexplained cash credits - CIT-A deleted the addition - HELD THAT:- Adverting to the view taken by the A.O that as the assessee had claimed to have procured goods from 17 tainted parties who were involved in the business of providing bogus bills and accommodation entries, therefore, corresponding purchase transactions were to be held as bogus, we are afraid could not have been summarily so held by him by discarding the substantial documentary evidences that were filed by the assessee in support of the authenticity of the purchase transactions in question. As is discernible from the orders of the lower authorities no incriminating material had been brought on record to support the claim of the A.O that the assessee had booked bogus purchases. On the contrary, as observed by the CIT(Appeals), and rightly so, now when purchases in question had duly been substantiated by the assessee by placing on record invoices of the suppliers which clearly make a reference of the names, weight, quality and quantity, transportation vehicle numbers, names of drivers, bank statements of the assessee showing the payments made, confirmations of brokers, delivery of the goods at the CCI which is a government body and loading of the goods into railway wagons for which bills had been issued by the railways that were cleared by the assessee, the A.O without dislodging the authenticity of the aforesaid documents could not have held the purchases in question as bogus. As regards the infirmities in the vehicle registration numbers as was relied upon by the A.O for supporting his conviction that the assesee had only obtained bogus bills and not made any genuine purchases of the goods in question, we find that the assesee qua the said issue vide his letter filed before the CIT(Appeals), had came forth with necessary clarifications and correct vehicle numbers which matched with the weighment slips at CCI. On a perusal of the aforesaid factual position, we are of the considered view that now when the assessee had corrected the mistakes and provided the correct vehicle numbers which tallied with the weighment slips of CCI, then, there remained no occasion for doubting the authenticity of the assessee s claim of having purchased the goods in question. As observed by the CIT(Appeals), and rightly so, though the registration of some of the suppliers had been cancelled by the Commercial Tax Department prior to the impugned purchases claimed by the assessee, but then on the said standalone basis it could not have been inferred that the business of the said suppliers was completely closed down, because there was evidence that goods were supplied by the said parties to the assessee through the brokers. Apart from that, as observed by the CIT(Appeals), we find that except for in the case of 4 suppliers registrations in the case of the remaining suppliers was cancelled by the Commercial Tax Department much after the end of the relevant financial year in which the assessee had purchased rice from them. Also, we concur with the view taken by the CIT(Appeals) that for the reason that the suppliers in question had not shown rice sales in their sales tax returns filed with the Commercial Tax Department, adverse inferences as regards the genuineness of the assessee s claim of having purchased goods from them could not have justifiably been drawn, specifically when supporting documentary evidence was placed on record by the assessee. We are, also, in agreement with the view taken by the CIT(Appeals) that now when the assessee had made payments to the suppliers through banking channels i.e., RTGS/NEFT and A/c payee cheques, therefore, it was incorrect on the part of the A.O in absence of any supporting material to conclude that the amount in question would have been withdrawn and returned to the assessee after deducting commission on the same. We concur with the view taken by the CIT(Appeals) that as the A.O had not controverted the material which was submitted by the assessee during the course of the assessment proceedings, viz. vehicle numbers (which were corrected in the assessment proceeding), bank details, transportation details of trucks, custom clearance details, export sales and domestic sales documents, confirmation from exporters a/w. copies of account, but had chosen to focus more on the modus operandi adopted by the firms/brokers for providing bogus bills/accommodation entries, therefore, in absence of dislodging of the aforesaid supporting documents/materials there was no justification on his part in drawing adverse inferences as regards the authenticity of the purchases in question. We, thus, in terms of our aforesaid observations, finding no infirmity in the well-reasoned view taken by the CIT(Appeals) as regards the authenticity of the purchases claimed by the assessee to have been made from the aforesaid suppliers/brokers, uphold his view to the said extent. Thus concluded that the assessee had made genuine purchases, which thereafter, were proved to the hilt to have been sold to the aforementioned buyers i.e., both for export and domestic sales, therefore, finding no basis for drawing of adverse inferences as regards the authenticity of the sale transactions by the A.O., we concur with the well-reasoned view of the CIT(Appeals) who had rightly vacated the said addition - Decided against revenue. 2022 (8) TMI 668 Disallowance u/s 14A r.w.r. 8D - AO has made disallowance as per 8D(ii) of the Act by considering the 1% of the average investments as held by the assessee - HELD THAT:- Only those investments have to be considered in which the assessee has earned/yielded exempt income which does not form part of the total income during the relevant previous year, whereas, it appear that the AO has considered the entire investments for want of not submitting details by the assessee. Assessee also did not furnish details of the investments made on which the assessee has received exempt income as required under Rule 8D(2)(ii) . Accordingly, we direct to the assessee that he will submit the details of the investments in which the assessee has received exempt income during the assessment year and the AO shall calculate the disallowance as per Rule 8D(2)(ii) for the relevant assessment year. Rule 8D(2)(ii) has been amended by the IT (Fourteenth Amdt.) Rules 2016 w.e.f 2/6/2016 , which has been cited supra. Considering all remit this issue to the file of the AO for re-computation of disallowance u/s14A of the Act r.w. Rule 8D(2)(ii). The assessee is directed to provide the necessary details/ documents to substantiate his case and not to seek unnecessary adjournment for early disposal of the case. Appeal of the assessee is allowed for statistical purposes. 2022 (8) TMI 667 Revision u/s 263 - claim of deduction u/s 54F has not been claimed correctly and Assessing Officer has not seen these aspects - assessee has filed the copy of memorandum of understanding, to prove the share of the assessee upon which the deduction was claimed now and not before the assessing officer but PCIT hold a view that as it was not on record and it is also executed after purchase deed is registered and thus ld. PCIT hold a view that this evidence is after thought - PCIT further observed that if the assessee claimed his claim to the extent of 50% deduction u/s 54F, surely, the payment received from sale of plot would have been paid in acquiring the house but the relevant joint bank statement was not available on record by the assessee - HELD THAT:- AO has asked pointed question on the investment made by the assessee and considering the disclosure made by the assessee the same accepted - on the detailed observation that the ld. AO has already verified the claimed to his satisfaction and merely the claim is not verified with the MOU or other evidence the claim which is based on the evidence already considered cannot be revisited merely in the opinion of the PCIT the claim is not supported by the evidence in the manner desired by him. Therefore, in our considered view the assessment order cannot be said to the prejudicial and erroneous in the interest of Revenue, when all the information were already available on record. Once we have satisfied that the AO has already raised a query and verified the claim of the assessee, considering the relevant material placed before us. The records already speak that the share of the assessee is 50 % therefore, considering the arguments of the ld. AR of the assessee, we found force that though AO seen the issue in the A.Y 201617 may not have called for full details in A.Y 2017-18 merely on these issue in the year it cannot be said that the assessment order passed is erroneous and prejudicial to the interest of Revenue. We hold that the ld. PCIT has wrongly invoked the provisions of section 263 of the Act and in terms of these observations, we quash the order of Pr.CIT passed u/s 263 - Decided in favour of assessee. Customs 2022 (8) TMI 666 DEPB credit - Quartz watches - it was held by High Court that quartz wrist watches with gold bracelets would fall in the generic description of quartz watches at serial Nos. 36 and 37 of the DEPB Scheme. In fact, our interpretation is in consonance with the general instruction No. 4/general Para No. 4 introduced on 31st March, 1999 inasmuch as it admits that gold watches are covered under the generic description of watches. HELD THAT:- There are no cogent reason to entertain these appeals. The judgment impugned does not warrant any interference - appeal dismissed. 2022 (8) TMI 665 Applicability of time limitation - Rejection of petitioner s application for allowing it to file its return on-line, for incentive in question, relating to 4th quarter up to 31st October, 2012 - present petition is filed in February, 2019 against such grievance - It is the grievance of the petitioner that the respondent No. 6 has not considered the reasons cited by the petitioner for the delay in filing the application and has arbitrarily exercised its discretion under Clause 4 of the Scheme in order to reject the application as non-deserving without considering the explanation of the petitioner - principles of natural justice. HELD THAT:- Claim of the petitioner for benefit of the incentive in question under the Industrial Promotion Scheme, 2010 relating to quarter ending June 30th, 2012 against which this Writ Petition was filed in 2019 was denied admittedly for the non-fulfilment or failure on the part of the petitioner in filing such claim as per norms of the incentive scheme in question by which it had to file the same online within specified time by taking the alleged ground of technical glitches in its internet system which could not be substantiated by the petitioner by any material evidence and whether there was any glitches in the internet connection of the petitioner or not at the relevant point of time in 2012 is a question of fact and matter of evidence and it could not be gone into by the Writ Court in exercise of its constitutional writ jurisdiction under Article 226 of the Constitution of India, moreso in absence of any material evidence by the petitioner in this regard. Petitioner in this Writ Petition failed to make out any case that any provision of law has been contravened by the respondent authority concerned in passing the impugned order of rejecting the claim of the petitioner or that the impugned order rejecting the claim of the petitioner is contrary to law or is without jurisdiction or is in violation of principle of natural justice or there is any perversity or there is any discrimination against the petitioner by the respondents in rejecting the petitioner s claim of incentive benefits in question. Petition dismissed. 2022 (8) TMI 664 Determination of rate of duty for (imported) goods entered for home consumption - Charging enhanced rate of duty on the consignments in question on the basis of the impugned notification No. 103/2020-Customs (N.T.) dated 29th October, 2020 - retrospective effect of notification or not - validity of impugned reassessment of bills of entry in question on the basis of which petitioner was asked to pay duty of higher tariff value for clearance of the goods in question - HELD THAT:- As per Section 15 of the Customs Act, 1962, for determination of the rate of duty and valuation of imported goods, in the case of goods in question which entered for home consumption under Section 46 of the Customs Act, not only the date on which the bills of entry in respect of the goods is presented is the only criteria rather the time of presenting the bill of entry on the said date is also an essential criteria for determination of rate of duty on the goods in question. Action of the respondents customs authority concerned charging at the enhanced rate of duty on the goods in question on the basis of the impugned notification No. 103/2020-Customs (N.T.) dated 29.10.2020 which was egazetted and digitally signed on 29.10.2020 at 23:18:25 hrs whereby Tariff Value of the subject goods was enhanced from USD 755MT to USD 782 MT is not justifiable in law since it is an admitted position substantiated by record that bills of entry relating to goods in question were already self assessed on 23.10.2020 and 26.10.2020 at the prevailing rate of duty and Entry inward was granted to the vessel in question carrying the subject goods on 29.10.2020 at 11:00 hrs which is the time prior to the time of coming into effect the aforesaid E-Gazetted Notification dated 29.10.2020 at 23:18:25 hrs. The action of the respondents customs authority charging at enhanced rate of duty on the goods in question on the basis of the aforesaid E-Gazette Notification dated 29.10.2020 by giving retrospective effect to it, is arbitrary, illegal and not sustainable in law - the respondents/authorities concerned are directed to refund to the petitioners the excess duty amounting to Rs. 96,60,467/- which was collected by the respondent customs authority on the basis of the aforesaid impugned Notification No. 103/2020-Customs (N.T.) dated 29th October, 2020 at a higher tariff value, within a period of 8 weeks from the date of communication of this order. Petitioner will be at liberty to claim for interest on the aforesaid amount to be refunded in accordance with law. Petition disposed off. 2022 (8) TMI 663 Demand of additional fine/ charge/ penalty 5 times of regular fees by the respondents from the petitioners purportedly under Clause 14 (2) of Chapter VI of the Plant Quarantine Order (Regulation of Import into India), 2003 - Relaxation conditions of Import Permit and Phytosanitary Certificate - deterring petitioners from importing timber from such countries which do not meet with the parameters of fumigation as per Indian standards - restriction on use of Methyl Bromide in India which is a threat to environment of the country - It is the case of the petitioners, that imposition of penalty will amount to restricting their trade and is in violation of Article 19(1)(g) of the Constitution of India, hence the provision, which enables the authority to levy penalty may be quashed. Whether the levy of five time fees in the form of penalty upon the petitioners on import of timber after granting them relaxation for such import will violate the provisions of Article 19(1)(g) of the Constitution of India, and can such levy satisfy the test of reasonableness of restriction on free trade as prescribed in clause(6) of Article? HELD THAT:- Article 19(1)(g) of the Constitution of India guarantees right to practice any profession, occupation or trade or business. However, the freedom is not unrestricted or uncontrolled in view of clause (6) of the article which authorizes the legislation to (a) impose reasonable restrictions on this right in the interest of general public, (b) prescribes technical or professional qualifications necessary for carrying on any profession, trade or business; and (c) enables the state to carry on any trade or business to the exclusion of the private citizens, wholly or partially - While imposing reasonable restrictions, the nature of the business or trade is the necessary element in deciding the reasonable restrictions. The petitioners are dealing in a trade which uses a chemical harmful to the ozone. Methyl Bromide is listed as Ozone Depleting Substance (ODS) under the Montreal Protocol of United Nations. The Union of India is a signatory member since 19.06.1992. As per the said protocol the developing countries will have to phase out use of Methyl Bromide from the fumigation treatment. It is also an undisputed fact that as on today there is no other alternative treatment of fumigation declared by the Indian Government, and it appears that efforts are being made to find an alternate to Mehtyl Bromide and the same is in nascent stage. The impugned OMs and the provision of Regulation 14(2) of PQ Order cannot be set aside on the ground of unreasonable classification. The sole discretion lies with the authorities to classify such goods who are expert in the field, and this Court cannot set in the shoes of such experts and impose its wisdom on the subject unless it is shown that the procedure so followed is absolutely illegal and against the rules and regulations. However, at the same time the petitioners cannot be subjected to penal fees for the inaction of the exporting countries. Restriction on use of Methyl Bromide - HELD THAT:- It is not denied by the respondents that the Ministry of Agricultural and Farmers Welfare Government of India has framed guidelines for usage of Methyl Bromide for fumigation on various products as per Montreal Protocol. Such fumigated products by Methyl Bromide are being exported by India after framing of necessary guidelines being Quarantine Treatment and Application Procedures of Methyl Bromide Fumigation. Thus, the concern of the Indian Government with regard to the affecting of bio-security appears to be well founded, however in wake of no other alternative as on today, the imposition of penalty on the petitioners appear to be harsh. The respondents cannot approbate and reprobate on usage of same chemical by taking shelter under bio-security of country. It is also an undisputed fact that as on today no rules or guidelines or regulations are framed by the Government of India mandating the use of any other chemical except Methyl Bromide for fumigation process. Article 19(1)(g) of the Constitution of India guarantees that all citizens have the right to practise any profession or to carry on any occupation or trade or business and Clause (6) of the article authorises legislation which imposes reasonable restrictions on this right in the interests of the general public. It is not disputed that in order to determine the reasonableness of the restriction regard must be had to the nature of the business and the conditions prevailing in that trade - This Court fails to understand that by imposing penalty, what type of evil is sought to be remedied, whether the respondents want to restrict the use of Methyl Bromide (which is being already used for exports) and imports or after granting approval and relaxation to the petitioners for import, the respondents want to restrict such import after their consignment is fumigated both off-shore and on-shore. The action of the respondents in levying fine or penalty will amount to reasonable restrictions having direct impact on their right guaranteed under Article 19(1)(g) of the Constitution of India, since the petitioners cannot carry on with their trade unless they pay such fine or penalty. The respondents before imposing fine or penalty should have deliberated on the issue and the adversity faced by the petitioners, since the issuance of phytosanitory certificate is beyond their sphere or ambit. They cannot insist the exporting country to issue phytosanitory certificate as per the requirement of Indian parameters. Without resolving the issue at the ends of NPPOs of each country, the petitioners are being penalised. Thus, such an action of the respondents is arbitrary and invades their right to trade, hence the same calls for interference. Whether this Court, while exercising its powers conferred under Article 226 of the Constitution, set aside the impugned Regulation and subsequent OMs which are in form of delegated legislation? - HELD THAT:- Unquestionably, in the present case, the impugned Regulation and the subsequent OMs do not satisfy the principles of rationality and they infract the fundamental rights of the petitioners guaranteed under Article 19(g) of the Constitution of India, hence this Court, in exercise of powers conferred under Article 226, has the explicit authority to set aside the same. The impugned Regulation 14(2) of the Plant Quarantine (Regulation to Import into India) Order, 2003 of Chapter-VI is declared as arbitrary and unreasonable and in violation of fundamental rights guaranteed under Article 19(g) of the Constitution of India to the extent it stipulates charging of fees of five times of normal rates. The same is quashed and set aside to the said extent only - Petition allowed. 2022 (8) TMI 662 Principles of natural justice - opportunity of hearing was extended to the Petitioner or not - petitioner is guilty of fraud or not - HELD THAT:- The show cause notice is dated 6th June 2022. As per paragraph 10 of the show cause notice, the Petitioner was directed to file reply by 4.00 p.m. on 7th June 2022. The Petitioner, it appears, has filed Reply within the stipulated time, however, the Petitioner was not provided with a video conferencing link nor was given hearing. The same is not in consonance with the show cause notice, so also the provisions of the Act, 1992. The impugned order is passed on 7th June 2022 itself - As the opportunity of hearing was not given as mandated under the Statute and the show cause notice, the present petition is entertained. The impugned order is set aside only on the ground that an opportunity of hearing was not extended - petition disposed off. 2022 (8) TMI 661 Smuggling - Gold - reasons to believe - onus to believe - framing of charges - retraction of statements - levy of penalty u/s 112(b) of the Customs Act - HELD THAT:- The Tribunal in the case of D. ANKINEEDU CHOWDRY VERSUS COMMISSIONER OF CUSTOMS, CHENNAI [ 2004 (8) TMI 243 - CESTAT, CHENNAI] held that in any other manner dealing with used in Section 112(b) of the Customs Act has to be read ejusdem generis with the preceding expression in the clause viz. carrying, removal or depositing etc. It is held that accordingly to the above doctrine, meaning of expression in any other manner of dealing with should be understood in sense similar or comparable to how preceding words viz. carrying, removing, depositing etc. are understood. The appellant cannot come within the ambit of Section 112(b) because appellants had never acquired possession or in any way concerned in any of the activities mentioned in the Section or any measure dealing with any goods which the appellant knew or had reason to believe are liable to confiscation. In the absence of the department having proved the knowledge of the appellant in the activities relating to the smuggled gold, there were no grounds for imposition of penalty on him.It is now well established that mensrea is an important ingredient for imposing a penalty on the person enumerated in Section112(b) of the Customs Act. The evidence brought out by the department nowhere suggests that the appellant was aware that the goods in question were smuggled into the India. The penalty imposed on Appellant, therefore, cannot be sustained. The appellant is not liable imposition of penalty under Section 112(b) of the Customs Act, 1962 - Appeal allowed - decided in favor of appellant. 2022 (8) TMI 660 Benefit under EPCG Scheme denied - refractory bricks used for re- lining or maintenance of the furnace - exemption denied on the ground that these are not capital goods - Department was of the view that since Furnace Oil could be procured duty free only if it was required for boilers in textile units, M/s Jayant Agro Organics Ltd could not procure the Furnace Oil duty free since they were not a textile unit - Extended period of limitation. HELD THAT:- The refractories imported by the appellants are covered by the definition of accessory and, hence, included in the definition of capital goods . Thus, the definition of capital goods not only includes refractories for initial charge but also those imported as replacement for the purpose of re-lining or maintenance of the furnaces. The Appellants have, therefore, correctly availed the benefit of the two exemption notifications, N/N. 102/2009-Cus dated 11-09-2009 and 103/2009-Cus also dated 11-09-2009. The first part of the definition of capital goods uses the term means . The term means is exhaustive in nature and is meant to cover all the items mentioned therein, namely, plant, machinery, equipment or accessories, as ordinarily understood, required for the manufacture or production, either directly or indirectly of goods. Refractory bricks are clearly accessories required for lining of the furnace, and hence indirectly used for manufacture of finished goods by the appellants. The use of the expression refractories for initial lining in the inclusive part of the definition of capital goods does not in any way restrict the meaning of the terms used in the means part of the definition. The refractories meant for re-lining of furnaces, i.e., for replacement, are covered by the means part of the definition of capital goods and this interpretation cannot in anyway be restricted or controlled by the use of the expression refractories for initial lining used in the inclusive part of the definition of capital goods . Extended period of limitation - HELD THAT:- The Ld. Advocate of the Appellant is agreed upon, that notwithstanding the fact that Section 28 has not been invoked in the show cause notice or in the impugned order, the department cannot ignore those provisions. The show cause notice ought to have been issued within the time period prescribed therein. The normal time limit prescribed is one year from the relevant date. The extended time limit of 5 years can be invoked only if there are grounds to hold that the Appellant had willfully misstated or suppressed facts from the department. This charge cannot be sustained. The Appeal is allowed both on merits as well as on limitation. Corporate Laws 2022 (8) TMI 659 Distribution of proceeds - winding up proceedings - whether the appellant-company had received amounts in excess of Rs.1,43,05,661/-, and furthermore, as to how the said amount(s) were distributed? - HELD THAT:- The S.A. seems to suggest that Rs.77,00,000/-, received in the first instance, was accounted for, and after adjusting the expenses that had been incurred by the appellant-company, was distributed equally between the parties. 24.5. Insofar as the balance amount i.e., Rs.66,05,661/- is concerned, the figures given in the winding up petition show that the respondent received, if not, Rs.22,22,000/-, it surely did receive Rs.20,22,000/- - It does appear that there is a typographical error vis- -vis the figure shown against the date set forth in the table, which is 25.06.2009. The respondent clearly did not place any material before the Learned Single Judge, to demonstrate that the appellant had received monies in excess of Rs.1,43,05,661/-. Distribution of Rs.9,99,894.50/- - HELD THAT:- Although Ms Altaf says that the respondent is required to bear the burden of expenses incurred in the arbitration proceedings, there is no material to demonstrate, at least presently, that the respondent was called upon to share the expenses. The impugned order dated 07.01.2019 is set aside - The appellant-company will deposit 50% of Rs.9,99,894.50/-. with the Registry of this Court - Appeal disposed off. 2022 (8) TMI 658 Oppression and mismanagement - issuance of 30,000 equity shares by private placements - purchase of 15626 shares of the Respondent No. 1 from Mr. Parasmal Lodha, the present petitioner and other shareholders - hit by provisions of MRTP Act, 1969, the Securities Contracts (Regulations) Act, 1956 and Companies Act, 1956 or not. HELD THAT:- A petition under S. 397 398 of the Companies Act, 1956 may be resisted not so much as by Limitation Act as on principles of delay and latches - Even otherwise, assuming the Limitation Act were to apply, even then it is a well settled principle of law as reiterated by the Hon'ble Supreme Court of India in RAMESH B. DESAI VERSUS BIPIN VADILAL MEHTA [ 2006 (7) TMI 325 - SUPREME COURT ] that the plea of limitation is a mixed question of law and fact. The substance of the allegation of the Petitioner relates to allotment to parties who had a close nexus with Respondents no. 2 3 and which has been claimed to be oppressive. Furthermore, there are other allegations of oppression and mismanagement also which acts took place on various dates which the Petitioner contends that it learnt of only later on. On the other hand, the Respondent has not produced proof that the Petitioners were aware of these facts at a time prior to 3 years from date of filing of the petition. It would therefore, not be proper to dismiss the petition on ground of delay or limitation - the acts of oppression and mismanagement in question are of continuing acts even on the date of filing of this petition and therefore this petition in no way can be said to be barred by limitation. Allotment of 30,000 shares of Respondent no. 1 to other respondents - HELD THAT:- The issuance and allotment of the said 30,000 shares in favour of the allottees thereof, including respondent Nos. 14, 15 and 16 was certainly a dishonest act of the Respondent Nos. 2 and 3 that resulted in not only in oppression insofar as the shareholders are concerned, but also an act of intentional mismanagement, if not a fraud in the Company itself on the company itself. It is now well entrenched in legal jurisprudence that fraud unravels everything - the explanatory note given along with the notice of 54th annual General Meeting was not a proper one and was violative of Section 173(2) of the Companies Act, 1956. On the issue of necessity for issuance of 30,000 additional equity shares it would be appropriate to note that the Respondents have contended that the capital was required by Respondent No. 1 and that it was merely complying with RBI's guidelines. Furthermore, the Respondents have contended that at the time these 30,000 shares were issued, Respondent no. 1's financial condition was in doldrums and that it was difficult for Respondent no. 1 even to find any investors in the Company. It was contended that the investment certificates of the investors were actually a liability rather than assets - the aforementioned reason may or may not be a plausible reason for issuance of the 30,000 equity shares. However, it is an undisputed fact that no such reasoning has been provided for either in the notice of the annual general meeting or the explanatory note annexed along with the notice. The Respondent ought to have given these explanations to its shareholders who have right to know the reasons for issuance of additional equity shares and for the consequent change in the shareholding structure of Respondent No. 1. It ought to have been disclosed that allotments would be made to persons who may have nexus with Respondents no. 2 3. Nexus between the allottees of these 30,000 shares for benefit for Respondent No. 2 and 3 and the relationship between them - HELD THAT:- In/around September 1988, Respondent no. 1 company sanctioned a clean unsecured advance of Rs. 3 crores to Respondent no. 30 company, which is owned by Respondent no. 31 company. The relationship between Respondent no. 31 and Respondent no. 2 dates back to several years. Pertinently, at the time of sanctioning the loan, the paid up capital of Respondent no. 30 was merely Rs. 200/-. In para 79 of the reply, Respondent no. 2 contends that Rs. 30 lacs was advanced by Respondent no. 1 to Respondent no. 30 on 30.04.1989 and another sum of Rs. 2.70 crores on 21.4.1989 and that both loans were for 3 years carrying interest at 20% and that the loans had been advanced without touching certificate holders monies. But the fact remains that loans were advanced by Respondent no. 1 to Respondent no. 30 for which there is no explanation - It is the settled principle that the corporate veil of the company can be lifted for the advantage of the Company. A This is a fit case where the corporate veil of the other Respondent Companies should be lifted. Applicability of provisions of The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP, 1969) - HELD THAT:- Explanation III to Section 2(v) of the MRTP Act clearly states that For removal of any doubt, an investment company shall also be deemed to be an undertaking for the purpose of this Act. Section 3 lists out the exclusions on which the MRTP Act would not apply. A perusal of Section 3 would show that Respondent no. 1 Company is not covered under any of the exclusions. Although, Section 26 stood repealed by the MRTP (Amendment) Act, 1991, the law, as it existed at the relevant time was that any enterprise on which part 'A' of the MRTP Act was applicable, was liable to be registered under the MRTP Act - The nature of services undertaken by Respondent no. 1 and the assets of Respondent no. 1 as they existed at the relevant period would clearly show that Respondent no. 1 was liable to be registered under the MRTP Act and the provisions of the Act were applicable on Respondent no. 1. The manner in which these 30,000 shares have been allocated to the Respondent allottees is questionable, and from the materials on record it does appear that the Company's money has been used for purchase of its shares by the allottees. The Respondents have not shown by producing material on record what was their source of money for purchase of the shares and that the funds used for purchase of the same were not in any manner linked to the Company. As the law then stood, this was not a permissible transaction. Disputes qua purchase of 15,626 shares of Parasmal Lodha and others by the respondents - whether Respondent nos. 26 and 28 are in fact controlled and managed by Respondent no. 2 and 3? - HELD THAT:- The amounts advanced by Respondent no. 2 to Respondent no. 26 was in fact to buy shares of Respondent no. 1 Company from the present Petitioner. Again, it is admitted that Respondent no. 1 company had made a fixed deposit of Rs. 50 lacs in May 1988 with Standard Chartered bank. It is also admitted that the Respondent no. 2 had taken a loan of Rs. 40 lacs from the same bank - The reason for the Company depositing money with the Bank at times when personal loans were being taken by the Respondent no. 2 from same bank, and the proximity of these transactions with the purchase of shares by Respondent no. 26 etc. from the present petitioner leads to believe that the transactions were not independent of each other - The company issued bonus shares in the ratio of 1:1 in the year 1987 and 1991 and bonus shares in the ratio of 15:1 in the year 1994. Since, the initial purchase was void any action subsequent thereto must naturally be void as well. From the facts of this case, it is clear that Respondent nos. 2 and 3 had allotted shares of Respondent no. 1 Company to either their relatives, or the Companies indirectly controlled by them. This was done without disclosing the full facts - it is a fit case to exercise powers conferred on this Tribunal under sections 397, 398 and 402 of the Companies Act, 1956, or for that matter, under section 241-242 of the Companies Act, 2013. The issuance and allotment of 30,000 no. of shares made to the Respondents pursuant to the 54th Annual General Meeting dated 30.12.1987 are declared to be void. The dividend received by the allottee shareholders and/or their nominee or assigns be cancelled and be directed to be returned back to the respondent company No. 1 within 30 days - Issuance and allotment of 15,626 shares to Respondents no. 26 28 of Respondent no. 1 Company is declared as null and void. The holders of these shares are directed to return the shares, bonus shares and accrued dividend thereon to previous shareholders i.e. the transferors within 30 days. Petition allowed. Securities / SEBI 2022 (8) TMI 657 Payment due for the services rendered to the unitholders prior to the winding up - Upfronting of trail commission - inflows through Systematic Investment Plans - Commission payable to mutual fund distributors - FIFA claims that independent financial advisors/mutual fund distributors are entitled to payment of commission agreed between them and Franklin Templeton Asset Management (India) Private Limited, which are in the nature of recurring expenses as per Regulation 52 of the Security and Exchange Board of India (Mutual Funds) Regulations, 1996 - whether asset management companies/mutual funds shall adopt a full trail model of commission in all schemes, without payment of any upfront commission or upfronting of any trail commission, directly or indirectly? - HELD THAT:- FIFA has claimed that the commission payment due to the mutual fund distributors on and from 23rd April 2020 is an amount due and payable under the scheme , as it is an amount or payment that had accrued before the publication of notices under Regulation 39(2)(b), but was not paid as it was payable in future. Commission payable to mutual fund distributors is in the nature of trail, and therefore, is payment due for the services rendered to the unitholders prior to the winding up. This argument is farfetched and fallacious. The recurring liability is not a present liability, but an obligation which, on satisfaction of certain conditions, may accrue in future. The right to claim commission may not accrue and become due and payable. Distributor commission, as a recurring liability, is not payable if the unitholder(s) redeem the unit. Winding up of the scheme entails similar effects and consequences. As noticed above, it is the asset management company which is entitled to charge fees and expenses in terms of sub-regulations (1) and (2) of Regulation 52. The mutual fund distributors are not entitled to direct payment from the unitholders. Payment to the distributors is made by the asset management company, from the amount that they deduct as a recurring expense in terms of Regulation 52(4)(b). On and after publication of the winding up notice in terms of Regulation 39(3)(b), the trustees and the asset management company cannot claim any payment on account of recurring expenses under clause (b) to sub- regulation (4) to Regulation 52. That being the position, as held above, the claim of FIFA has to be rejected. If the amount cannot be due and payable to the principal, the claim of the agent or a third party, in view of the Regulations, must also fail. The claim of FIFA, on the basis of the Circular dated 22nd October 2018, which has been referred to above, is equally misconceived and untenable. The Circular dated 22nd October 2018 bars the asset management company from making upfront payment or upfronting of any trail commission, except in case of inflows through Systematic Investment Plans. It is also stipulated that, when the Systematic Investment Plan is discontinued for a period for which commission is paid, the commission amount has to be recovered on pro rata basis from the distributor. As a deduction, it follows that on publication of notices in terms of Regulation 39(3)(b), the business of the mutual fund comes to a stop and therefore, on and from that date the trail commission is not payable, as the scheme is to be wound up and the money is to be collected and paid to the unitholders, in terms of and as per the mandate of Regulation 41. Even if a distributor renders some services to the unitholders after publication of the notice under Regulation 39(3)(b), it would not entitle him to claim an amount from the asset management company. The Circular dated 22nd October 2018 cannot override the Regulations. The Circular does not intend to do so. It has been issued to bring about transparency in expenses, reduce portfolio churning and mis-selling in mutual fund schemes. The intent behind specifying total expense ratio and the performance disclosure for mutual funds is to bring greater transparency in expenses and to not confer any right on the mutual fund distributors to claim expenses under clause (b) to Regulation 41(2), which pertains to the procedure and manner of winding up. Franklin Templeton Trustee Services Private Limited and Franklin Templeton Asset Management (India) Private Limited have filed an affidavit before us stating that they have borne liquidation expenses amounting to approximately Rs. 40,00,00,000/- (Rupees Forty Crores) towards various services such as liquidator s fee, disbursement expenses, fees for the e-voting platform and the scrutinizer for voting results, etc. It is stated by them that this amount is not intended to be charged to the six Schemes in the interest of the unitholders of the Schemes. We have taken the said statement on record. 2022 (8) TMI 656 Insider trading - Freezing of bank account - bank accounts of the petitioner and her fixed deposits were freezed by the 1st respondent during the course of investigation - amounts for creation of fixed deposits and savings accounts in question with Karur Vysya Bank and HDFC Banks in the name of the petitioner were the proceeds of the crime and hence were seized during the investigation - petitioner seeking Writ of Mandamus directing the 1st respondent to defreeze the bank account and fixed deposits of the petitioner and savings bank account held in the respondent Nos. 2 to 4/Banks and for consequential directions - HELD THAT:- Admittedly, the petitioner was not shown as accused by the 1st respondent in CC registered against her sons. She was neither the promoter nor the Director of Satyam Computers Services Limited Considering the contentions of the learned Special Public Prosecutor of CBI as stated in the counter affidavit by the 1st respondent and the observations of the Hon ble Apex Court [ 2018 (5) TMI 931 - SUPREME COURT] in the above aspect that she had made the off market transactions way back in the year 2003 at a price of around Rs.340 per share and the price of the shares rose sharply in the year 2006 touching the figure of Rs.966.80 and that the petitioner, if she was in position of Unpublished Price Sensitive Information (UPSI) would have sold the shares during peek price inspite of selling at depressed price in the year 2003 and cleared her name in the proceedings launched by SEBI and considering that no attachment orders were issued by the Court during the trial or in the final judgment and considering the age of the petitioner who was at the fag end of her life and the submission of the learned counsel for the petitioner that she required money for her expenditure during her old age, it is considered fit to direct the 1st respondent to defreeze the bank accounts and fixed deposits of the petitioner and permit her to operate the accounts and fixed deposits Writ Petition is allowed directing the 1st respondent to defreeze the bank accounts and fixed deposits of the petitioner by giving a direction to respondent Nos.2 to 4 to allow the petitioner to operate the accounts and fixed deposits. Insolvency & Bankruptcy 2022 (8) TMI 655 Maintainability of application - initiation of CIRP - Corporate Debtors failed to make repayment of its dues - Financial Creditors - Non-performing assets - existence of debt and dispute or not - date of default - HELD THAT:- The Financial Creditor granted various facilities to the Corporate Debtor and upon non-payment of those facilities, the Account of the Corporate Debtor became NPA. Thereafter, the Applicant and Respondent vide Agreement dated 30.03.2015 entered into MRA. Excerpts of Schedule of repayment agreed vide MRA is also annexed to the Petition under which repayment was to be made till 2024-25. Even after entering the MRA, the Corporate Debtor defaulted the repayment schedule of MRA - Vide letter dated 01.02.2016, the Financial Creditor called upon the Corporate Debtor to pay a sum of Rs.174.61 crore being the amount due and payable as on 31.12.2015 within 7 (Seven) days from the date of receipt of recalled notice. Therefore, it can be construed as date of default were taken by the Applicant were correct. The Corporate Debtor failed to comply with the MRA. The Corporate Debtor contented that the amount claimed in the Application is not due and payable, the moment there is revocation of the MRA, the rights and liabilities of the parties falls back to the original facility agreements which were already declared NPA by the Applicant as has been demonstrated above upon the perusal of records. It is noticed that both the parties entered into MRA and there is no record of terminating MRA. Therefore, the Corporate Debtor s arguments are devoid of merits that the amount claimed is not due and payable under MRA. The application made by the Financial Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is in excess of minimum amount stipulated under section 4(1) of the IBC. Therefore, the debt and default stands established and there is no reason to deny the admission of the Petition. In view of this, this Adjudicating Authority admits this Petition and orders initiation of CIRP against the Corporate Debtor. Petition admitted - moratorium declared. 2022 (8) TMI 654 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - it is alleged that the Petitioner had unconditionally and irrevocably sold, transferred and assigned the loans granted to certain borrowers, to the Respondent and SCCPL - it is alleged that the loans sold turned out to be related party transactions and funds siphoning scheme adopted by the Petitioner which led to filing of multiple suits - HELD THAT:- The Respondent is not disputing the fact that the outstanding amount is due and payable to the Petitioner. Further, infact vide Settlement Agreement dated 01.07.2017 to which the Respondent is a signatory party acknowledged the debt of Rs.260,00,00,000/-. The Settlement Agreement was entered into pursuant to the litigation before the Hon ble Bombay High Court to settle issues. After reading settlement agreement by any stretch of imagination it cannot be concluded that the said agreement has altered the transaction between the parties. At the same time, it was acknowledged that basis the loan agreement dated 20.06.2015 a loan facility was availed to the tune of Rs.260,00,00,000/- - In the present case the application is filed by the Financial Creditor and the amount was disbursed against time value of money. Moreover, we hold that the facts of the present case are distinguishable on the ground that the settlement agreement on record ratifies that fact the Respondent was under a continuing obligation to repay the outstanding amount of Rs.260,00,00,000/- pursuant to loan agreement dated 20.06.2015. The acknowledgment meets all the essential ingredients of Section 18 of the Limitation Act,1963. Therefore, the debt is within the period of limitation. The application made by the Financial Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is in excess of minimum amount stipulated under section 4(1) of the IBC. Therefore, the debt and default stands established and there is no reason to deny the admission of the Petition. In view of this, this Adjudicating Authority admits this Petition and orders initiation of CIRP against the Corporate Debtor - petition admitted - moratorium declared. 2022 (8) TMI 653 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - service of demand notice - whether the demand notice in Form 4 dated 29.10.2019 was properly served? - HELD THAT:- The demand notice was received as per tracking report mentioned at Annexure-F of the main petition. In view of the same, it is held that the demand notice has been duly served. However, no reply was filed to the demand notice. Whether the operational debt was disputed by the corporate debtor? - HELD THAT:- It is pleaded by the petitioner that there is no dispute of unpaid operational debt pending between the parties in any court of law or any other authority. The same has been inferred from the affidavit in terms of Section 9(3)(b) of I B Code, 2016. The affidavit is attached with the main petition. It implies that there is no pre-existing dispute in relation to the debt claimed as per Part IV of Form 5. Moreover, the corporate debtor in its reply stated that the amount claimed is not denied and the company is unable to pay any of the amount due and the corporate debtor has become financially unviable. Therefore it is evident from above that the present petition is of admitted liability. Whether this application is filed within limitation? - HELD THAT:- A demand notice issued dated 29.10.2019 in Form 4 attached as Annexure-F was duly served on the corporate debtor through speed post. It is observed that neither any reply from the corporate debtor has been filed in lieu of the above stated demand notice nor any payment has been made. Therefore, the period of limitation would begin from the date of default i.e. 16.05.2019. This application was filed on 01.10.2019 vide Diary No. 5283. Therefore, this Adjudicating Authority finds that this application is filed within limitation. It is seen that the petition preferred by the petitioner is complete in all respects. The material on record clearly goes to show that the respondent committed default in payment of the claimed operational debt even after demand made by the petitioner. In view of the satisfaction of the conditions provided for in Section 9(5)(i) of the Code, the petition for initiation of the CIR Process in the case of the Corporate Debtor, SNS Laboratories Limited, is admitted - petition admitted - moratorium declared. 2022 (8) TMI 652 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- Since, the Corporate Debtor was not present on that date, the matter was adjourned from 14.07.2022 to 27.07.2022 with a specific direction that the Corporate Debtor shall appear and address their arguments on 27.07.2022 failing which the argument of the Corporate Debtor would be treated as heard and appropriate order will be passed. Accordingly, the matter was taken up on board on 27.07.2022. However, the Corporate Debtor neither appeared nor addressed any arguments as directed by this Bench. Hence, having no other alternative, this Bench reserved the matter for orders. Time Limitation - HELD THAT:- The payment of Rs. 1 lac on 18.08.2016 made by the Corporate Debtor is clearly reflecting in the statement of account. Since, there is a payment made by the Corporate Debtor on 18.08.2016 the period of limitation would get extended for another three years from 18.08.2019 and the above Company Petition being filed on 29.05.2019 is well within limitation and the contention of the Corporate Debtor on that score is liable to be rejected. Payment of interest - HELD THAT:- It is relevant to mention here that there is a stipulation in the invoices raised by the Operational Creditor for payment of interest @ 24% per annum if the payment was not made on due date by the Corporate Debtor. Therefore, the contention with regard to the entitlement of the Operational Creditor for interest is also liable to be rejected. Pre-existing dispute or not - HELD THAT:- It is observed that the Corporate Debtor did not issue any reply to the Demand Notice nor filed any documents evidencing pre-existing disputes between both parties prior to the Demand Notice and therefore, the plea of pre-existing disputes mentioned by the Corporate Debtor in their reply is only for name sake and is only an afterthought to prevent the admission of the Company Petition. This Bench is of the considered view that there is no substance in any of pleas raised by the Corporate Debtor and the above Company Petition deserves to be admitted - Petition admitted - moratorium declared. 2022 (8) TMI 651 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial creditors - existence of debt and dispute or not - whether the present application is filed within limitation? - HELD THAT:- The present petition is filed vide Diary No.4710 dated 11.09.2019, wherein, it can be seen from the records that the date of default is 08.07.2019 and 20 days notice period is served on 19.07.2019. Therefore, the present petition is filed within limitation. Whether there is default in payment or not? - HELD THAT:- It is observed from the record that in the present case, the occurrence of default is evidenced by the copy of the ledger account, bank statement, statutory recalling notice and the same are attached as Annexure P-2, P-5 and Annexure P-7 respectively of the petition. The respondent-corporate debtor has also filed a reply wherein it has been admitted that there is default in respect of financial debt and the amount mentioned in the petition is due towards the petitioner and shown its incapacity to pay the liability. The application filed in the prescribed Form No.1 is found to be complete. Disciplinary proceedings pending against the proposed Resolution Professional or not - HELD THAT:- In the present case, in Part III of Form 1, Mr. Alok Kaushik has been proposed as Interim Resolution Professional. Thereafter, Mr. Gyaneshwar Sahai has been proposed as Interim Resolution Professional - The Law Research Associate of this Tribunal has checked the credentials of Mr. Gyaneshwar Sahai, and there is nothing adverse against him. The present petition being complete and having established the default in payment of the Financial Debt for the default amount being above the threshold limit, the petition is admitted in terms of Section 7(5) of the IBC. Moreso, the respondent has admitted the claim and expressed its inability to pay back the debt - Petition admitted - moratorium declared. 2022 (8) TMI 650 Condonation of delay of 1150 days in filing petition - sufficient reasons to condone delay or not - HELD THAT:- The above delay condonation petition was filed on 01.03.2021 and whereas the main Company Petition in which the Interlocutory Application was filed on 19.09.2019. Thus, admittedly the present I.A. is not filed along with the Main Company Petition and therefore the Petitioner has to explain the delay in not filing the above I.A. from 19.09.2019 till the filing date on i.e. 01.03.2021 since there is already a delay in filing the main Company Petition and therefore the delay is more than 1150 days. The only reason assigned in Para 18 of the Petition is that the Petitioner is exploring all the options available under law for recovery of its legitimate dues and on the other hand was also negotiating for settlement. The Petitioner except devoting more space in pleading various facts with regard to initiating various proceedings against the Corporate Debtor for recovery before the DRT etc. did not explain even a single day s delay. Condonation of delay is the discretionary jurisdiction conferred on the Courts and Tribunals and the Courts and Tribunals while dealing with the applications of condonation of delay have to liberally condone the delay in order to meet the ends of justice. At the same time, a duty is cast upon the Applicant to broadly and properly explain the overall delay. When once the Petitioner properly explains the delay, the number of days delay to be condoned is immaterial - Condonation of delay is the discretionary jurisdiction conferred on the Courts and Tribunals and the Courts and Tribunals while dealing with the applications of condonation of delay have to liberally condone the delay in order to meet the ends of justice. At the same time, a duty is cast upon the Applicant to broadly and properly explain the overall delay. When once the Petitioner properly explains the delay, the number of days delay to be condoned is immaterial It is the admitted case of the Petitioner that the default in this case was occurred way back in 2013 and the State Bank of Patiala initiated recovery measures by filing various proceedings in 2014 itself and the present Company Petition is filed in 2019. Since this Tribunal is conscious of the fact that the Courts and Tribunals while dealing with delay condonation application shall not look into the merits of the main case, this Bench is not making any comments as to whether the Main Company Petition is within limitation or not. There is an inordinate delay of more than 1150 days in this case and the Petitioner has miserably failed to calculate the exact number of days delay apart from broadly explaining the delay and such an inordinate delay cannot be condoned for mere asking simply because the petitioner is a premier public sector bank - Petition dismissed. 2022 (8) TMI 649 Approval of Resolution plan which is already approved by the CoC, and pending before the Adjudicating Authority for approval - Seeking direction that the resolution plan of the Respondent No. 1 be remanded back to the CoC so that the CoC can reconsider all the resolution plans submitted during the corporate insolvency process of the corporate debtor - HELD THAT:- Right to exercise commercial wisdom has an implied right to review the same. The Hon'ble NCLAT, in the BANK OF MAHARASHTRA AND ORS. VERSUS VIDEOCON INDUSTRIES LTD. AND ORS. [ 2021 (7) TMI 1292 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI ], has clearly stipulated that along with the right to exercise commercial wisdom, the CoC has the right to review such a decision. In the instant case, even though CoC had approved the plan already, pursuant to an affidavit filed by the CoC, the Tribunal considered the request and allowed the plan to be sent back to the CoC for consideration. This was on the basis of the fact that CoC always has a right to review its decision. It is noticed that the present application was filed by the Asset Reconstruction Company (India) Ltd., being the authorised representative of the CoC by passing the resolution with 96.95% for filing the present application. It is also noticed that the parent company of Respondent No. 1, i.e., Gulf Petrochem FCZ has been declared bankrupt and there is a freezing injunction on the promoters. The credit rating of the Respondent No. 1 is in default as on June 04, 2021. The successful resolution applicant has defaulted in other CIRP of M/s. Allied Strips Ltd. and M/s. Tirupati Infraprojects Pvt. Ltd., wherein also he was the successful resolution applicant. In this background, the present application has been moved by the CoC/lenders, with 96.95% voting in its favour, for remanding back the resolution plan for reconsideration of the CoC. The resolution plan can be sent back for reconsideration to the CoC, considering the changed circumstances and the commercial wisdom of the CoC, with 96.95% voting, to seek permission of Adjudicating Authority for reconsideration of the resolution plan need to be considered for better prospects of Resolution. The Tribunal is well within its rights to send back the resolution plan for reconsideration to the CoC, on request made by the CoC in its commercial wisdom - thus, NCLT does have the right to send back resolution plans for reconsideration if requested by the CoC. Also, it is settled law that the CoC of any corporate debtor has the sole right to decide on the terms of the Resolution Plan and that exercise of commercial wisdom by the CoC is also non-justiciable. The present resolution plan remanded to CoC - application allowed. 2022 (8) TMI 648 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- The Corporate Debtor filed a detailed reply alongwith Annexure R-l to R-16, primarily denying, the averments in the application to the effect that there is no debt and default. That the entire amount due and payable has been already been paid. The Ld. Counsel for the Corporate Debtor refers to the admitted bills and Statement of Account of the applicant to prove that the entire amount of Rs. 68,86,105/- has been paid and that there is no due - While it is the contention of the Petitioner that there is debt and default in excess of Rs. 68,86,105/- which has been already paid by the Corporate Debtor. The Ld. Counsel for the Petitioner was asked to explain how the petition is maintainable; in view of two important factors namely limitation and pendency of Arbitration Proceedings, which is a fall out of the series of notices and the Suit proceedings with reference to Arbitration. Time Limitation - HELD THAT:- The plea that Section 14 of the Limitation Act, 1963 will save the present case does not find merit. At the time of filing of the petition, i.e., on 27.01.2020, the Petitioner/Applicant knows about the pendency of Arbitral Proceedings and should have withdrawn the same at the time of filing and prosecuting the matter before this Tribunal. The afterthought to withdraw the Arbitral Proceedings before the Hon'ble High Court, that too after filing this petition before this Tribunal clearly shows that it was done to overcome the limitation and to invoke Section 14 of the Limitation Act, 1963. Therefore, it cannot be said that the applicant was bona fide prosecuting the proceedings before another forum. It is a sham plea to overcome the mandate of the IBC. The original petition should normally contain relevant documents in support of the petition in its complete form. But in this case not only the documents are not placed but the pleadings are also incomplete. The relevant documents namely, exchange of notices, suit proceedings, Arbitration Proceedings etc. have been deliberately omitted for reasons best known however, it will be fatal to the proceedings. There are no hesitation to hold that this Petition does not have any merit both in law and on facts. The dispute between the parties is clear and present. It attracts the provision of IBC as contended by the Respondent that the proceedings are barred by law in the facts of the present case - petition dismissed. 2022 (8) TMI 647 Maintainability of application - Initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- It is noted that there was a business relationship between the Operational Creditor and the Corporate Debtor, several work orders were issued by the Corporate Debtor and accepted by the Operational Creditor. As per the work orders, services are provided by the Operational Creditor against which 14 invoices were raised by the Operational Creditor from 21.04.2017 to 16.06.2017 amounting to Rs. 1,24,69,143/-. After that, the Operational Creditor requested the Corporate Debtor to pay the outstanding amount through a letter dated 19.03.2019, wherein the Corporate Debtor replied via letter dated 18.04.2019. and raised a dispute over the quality and standard of the services provided by the Operational Creditor. It is also noted that a Demand Notice under section 8 of the IBC, 2016 was issued on 17.05.2019 to the Corporate Debtor by the Operational Creditor demanding the outstanding dues of Rs. 1,79,47,390/-, the Corporate Debtor replied to the Demand Notice wherein it stated that there is a pre-existing dispute regarding the outstanding amount demanded by the Operational Creditor. It is clear that the Corporate Debtor has raised an issue with the services provided by the Operational Creditor prior to the issuance of the Demand Notice; and also, in the reply to the Demand Notice the Corporate Debtor informed the Operational Creditor about the pre-existing dispute. It can not be said that the dispute raised by the Corporate Debtor is afterthought and only in view of avoid its admission in CIRP - The disputes projected require thorough inquiry before proper forum. This Adjudicating Authority cannot undertake that exercise in its limited jurisdiction in hearing of application under section 9 IBC. Application dismissed. Service Tax 2022 (8) TMI 646 Nature of activity - sale or service - Non-payment of service tax - Service Tax registration not obtained - Site formation, clearance, excavation, earth moving and demolition services - supply and use of explosive to buyers at their side - reliability on statements of Shri Milesh D. Joshi, partner of appellant recorded under Section 14 of the Central Excise Act, 1994 - cross examination of witness not allowed - admissibility of evidences in terms of provision of Section 9D of Central Excise Act, 1944 applicable for service tax in terms of Section 83 of the Finance Act, 1944 - principles of natural justice - extended period of limitation. The appellant s main argument is that they have not provided any service whereas they have sold the goods namely explosives to their customers on principle to principle basis, hence no services are involved. HELD THAT:- The entire activity of the appellant is sale of Explosives. It is observed that the revenue has demanded the Service Tax on the total invoice value which is of sale invoice and it is issued against sale of the explosives. No bifurcation was provided in the invoice such as sale of goods and service charge. With this undisputed fact it is clear that the appellant have raised the invoices for the entire value only for sale of goods on the total sale value. The appellant have discharged the VAT on actual sale value of goods and not even on composition scheme like Works Contract Tax (WCT). The appellant have paid the entire VAT to the State Government. They have also booked the transaction in their profit loss account as sale of goods only. Accordingly it is clear that the appellant have sold the explosives and no any additional consideration was recovered towards any service. The contention of the revenue is based on the fact that the appellant have supplied the explosives in their own vehicle and the same was delivered at site. The goods were meant for blast at the particular place where the blasting was to be carried out. Therefore, the appellant have not only supplied the explosive but also carried out the blasting. Therefore, the revenue s contention is that the appellant have provided the service of site formation, clearance, excavation, earth moving and demolition . In this regard, it is found that since the appellant have raised the said invoice towards the supply of explosives and paid the VAT on the entire amount and no extra consideration towards the service was recovered the entire value recovered by the appellant from their client is indeed a sale value. Hence, no amount towards the service charge was recovered, therefore even if some incidental activity was carried out by the appellant, the overall transaction cannot be taken away from the transaction of sales in terms of sale or goods act. It is found from the fact on record that the Shot Firers are independent and technical expert to carry out the blasting, they are licensed with the Government s Department of explosives. The revenue has not adduced any evidence to show that the Shot Firers were acting as an agent of the appellant. Therefore, the Shot Firers job was carried out not on the behalf of the appellant but on behalf of the buyer of the goods - From the affidavit of the Shot Firers it is abundantly clear that the Shot Firers are not working on behalf of the appellant whereas they were deputed by the purchaser of the explosives for carrying out the blasting and for which they were paid the required consideration. In this fact the entire basis of the revenue that the Shot Firers have acted on behalf of the appellant is far from truth. Hence the entire foundation of the case gets demolished. The activity undoubtedly is of sale of goods. The sale of goods does not attract Service Tax either before 01.07.2012 and subsequent thereto. Post 01.07.2012 the definition of individual service was done away, the new definition of service was introduced under Section 65B (44)(a)(i) of the Finance Act, 1944 - From the new definition of Service it can be seen that any activity carried out by a person for another for consideration and includes a declared service is defined as service . As per sub clause (a) (i) of section 65 (B) (44) activity of a transfer of title in goods by way of sale gift or in any manner is not included in the transfer Service. Thus, the appellant s activity which is undoubtedly falling into the activity of trading is not liable to Service Tax. Without prejudice, we also find that even if it is assumed that the appellant s activity is a composite works contract service but the facts remains, the appellant have paid VAT on the entire value, the same should be treated as a deemed sale. In terms of Section 65B(44) (a)( ii) an activity which constitutes such transfer/delivering or supply of any goods, which is deemed to be a sale within the meaning of Clause (29 A) of Article 366 of Constitution. Therefore, even if these activities considered as service but there is no dispute that the appellant have raised the sale invoice and paid the VAT in such case as per the above Section 65B (44) (a)(ii). the activity being a sale is also excluded from the definition of service, for this reason also the activity of the appellant shall not be chargeable to Service Tax. Reliability on statements - HELD THAT:- In the peculiar facts of the present case, since all the documentary evidences established that the transaction is in the nature of sale, even if the partner of the appellant stated something which suits the revenue will not help the revenue for the reason that it is clearly contrary to the documentary evidences. It is also submission of the appellant that the statements of the partner were recorded under duress and pressure - The appellant during the adjudication disputed the statement and submitted that the said statement may not be used in proceeding. In this position we are of the clear view that even the version of the statement of the partner being contrary to the documentary evidences. It was incumbent on the Adjudicating Authority to cross examine the witness Shri Milesh Joshi partner in terms of Section 9D of the Central Excise Act. Violation of principles of natural justice - HELD THAT:- By not allowing Examination and Cross Examination of witness u/s 9D of Central Excise Act 1944, the adjudicating authority has destroyed case of Revenue. The entire case of Revenue has been vitiated in these proceedings, making the Service Tax demand unsustainable for violation of the Principles of Natural Justice. Except statements of Partner shri Milesh D. Joshi (witnesse), there is nothing on record to establish case of Revenue. Thus, when Adjudicating Authority has neither examined partner Milesh Joshi u/s 9D ibid nor allowed his cross examination, then, all such statements need not be considered as valid evidences and consequently, Service Tax demands based thereon deserves to be dropped in facts of the cases. This Hon'ble Tribunal at Ahmedabad in case of M/S. SAKEEN ALLOYS PVT. LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE AHMEDABAD [ 2013 (7) TMI 535 - CESTAT AHMEDABAD] Affirmed in COMMISSIONER OF CENTRAL EXCISE VERSUS SAAKEEN ALLOYS PVT. LTD. [ 2014 (5) TMI 606 - GUJARAT HIGH COURT] and Maintained in COMMISSIONER VERSUS SAAKEEN ALLOYS PVT. LTD. [ 2015 (10) TMI 558 - SC ORDER] has held that there needs to be positive evidence for establishing the evasion, and that confessional statement in absence of any cogent positive evidence cannot make the foundation for levying the excise duty on the ground of evasion of tax - From the above settled law viz-a-viz the facts of the present case, the statement in the present case has no evidentiary value, hence the same is discharged. Thus, it is beyond any doubt that the appellant have carried out the activity of sale of goods. Hence, the same will not fall under the category of any service. The service Tax demand, interest and penalties not sustainable on this ground. The appellant have raised other issues such as limitation etc - appeal allowed. 2022 (8) TMI 645 Rejection of Refund claim - applicability of Section 102(1)(a) of FA - claimant had provided the services to M/s. Gujarat State Police Housing Corporation Ltd. (GSPHCL) is a company and not a Governmental Authority hence, the exemption is not applicable - incidence of service tax passed on or not - principles of unjust enrichment - sufficient reason for delay in filing the appeal before the Commissioner (Appeals), or not - Whether the services provided by the appellant to GSPHCL falls under the category of services provided to government or governmental authority and eligible for exemption under Section 102 of the Finance Act, 1994 consequential refund thereof? - HELD THAT:- The learned Commissioner (Appeals) has rejected the appeal despite the appellant s filing of COD application showing difficulty for not filing the appeal within the stipulated time of 60 days. It is found that once the appellant have filed a COD application where delay is well within period of 30 days after stipulated period of 60 days, the learned Commissioner (Appeals) should have taken a lenient view and should have condoned the delay, by not condoning the delay the learned Commissioner (Appeals) has deprived the appellant from their right of appeal, therefore, the appellant should have been allowed condonation of the delay, accordingly, the order of rejection of the appeal by the Commissioner (Appeals) on time bar is not sustainable. Whether the service provided by the appellant to GSPHCL is service provided to a governmental authority? - HELD THAT:- The GSPHCL is a 100% owned by Government of Gujarat therefore, it clearly falls under the category of service provided to government authority - The corporation/board constituted under the act of State Government should be considered as a governmental authority and accordingly, exemption provided to the government or governmental authority is applicable in respect of service provided by a service provider to such board/corporation. In the present case also the service provider has provided service to GSPHCL which is a corporation of State Government incorporated under the State Government Act passed by the State Assembly accordingly, the GSPHCL is a governmental authority and exemption under Section 102 is clearly applicable. Principles of unjust enrichment - HELD THAT:- The lower authority have contended that the appellant have not submitted the necessary evidence to establish that the incidence of the service tax paid was not passed on to any other person. On this, the appellant may be given the opportunity to present the evidence and explanation on the aspect of unjust enrichment. Appeal allowed. 2022 (8) TMI 644 Levy of Service Tax - Commercial or Industrial construction services provided to Railways - Appellant have provided the services to Western Railway, which is a part of Ministry of Railway i.e. Government - extended period of limitation - HELD THAT:- There is no dispute on the facts on either side that Appellant have provided services to Western Railway, which is a part of the Ministry of Railway i.e. Government and that Appellant has not provided services to any person except Railways. It is also noted that after issuance of SCN dated 21-09-2020, Appellant has also participated in the adjudication proceedings conducted and have made submissions along with documents of Income Tax Returns, their work orders issued by Indian Railways and their other financial records including profit loss accounts etc with a prayer to drop the Service Tax demand in this case, issued unduly invoking extended period for demand. It is settled that Service Tax demand cannot be raised only on the basis of any such assessment made by the Income Tax Authorities. Information or data or documents relied upon loses its evidentiary value in absence of any independent inquiry which was mandatorily required to have been conducted by concerned officers of Central Excise department at Bhavnagar, before issuance of the Show Cause Notice dated 21-09-2020 - In this case, provisions of Section 36A and Section 36B does not appear satisfied as conditions imposed does not appear followed by Central Excise department. Hence, shared data by Income Tax department cannot be used against Appellant without independent inquiry/investigation carried by the Revenue. Therefore, demand of Service Tax confirmed with interest and Penalty by the adjudicating authority also deserves to be set aside on this ground. The provisions of Section 65A of Finance Act 1994 provides for classification of taxable services. It is settled law that activity shall be classified of a service which gives a service essential character, as per section 65A ibid as it is applicable. The activity of maintenance, repairs are distinct and separate taxable services listed under Sr. No. 12 of Notification No. 25/2012-ST. Hence, O-I-O is not in accordance with provisions of Finance Act 1994. Sr. No 12 of Notification 25/2012-ST allows exemption in respect of repair and maintenance of a civil structure. Therefore, services of Appellant were to Railways (Western), for Repairs and Maintenance is eligible for the above exemption. In catena of cases that Tribunal being a final fact finding authority can admit any fresh evidence and also argument. This issue has been considered by the Hon ble Supreme Court (Three Judges Bench), in the case of NATIONAL THERMAL POWER COMPANY LIMITED VERSUS COMMISSIONER OF INCOME-TAX [ 1996 (12) TMI 7 - SUPREME COURT] , which is to the effect that the Tribunal has jurisdiction to examine question of law which arises on facts, as found by authorities below, and having bearing on tax liability of assessee, even though said question was neither raised before lower authorities nor in appeal before Tribunal, but sought to be added later as additional ground by separate letter - In DEVANGERE COTTON MILLS LTD. VERSUS COMMISSIONER OF C. EX., BELGAUM [ 2006 (4) TMI 134 - SUPREME COURT] , the Hon ble Supreme Court has held that Tribunal has got wide power to hear and consider a new ground and decide appeal. There are no necessity to go into further details of the other points raised against Order-in-Original by Appellant like time limitation for demand invoking extended period not sustainable in this case, computing Cum-Tax-Value for Service Tax demand, though such points may have substantial force in favour of Appellant, when demand of Service Tax is not sustained on merits in the facts of this case. The impugned order confirming the demand of Service Tax with interest and imposing penalties on appellant is unsustainable and liable to be set aside - Appeal allowed - decided in favor of appellant. 2022 (8) TMI 643 Rejection of claim of refund of service tax - exemption in certain cases relating to construction of Government buildings - Section 102 of the Finance Act, 1994 - HELD THAT:- In terms of the provisions of Section 102 of FA, the appellant claimed refund of tax paid on certain services, that they claimed to have provided to military establishments. Due to the sensitive nature of the contract, the appellant could not produce the full text of the contract before the Revenue authorities and solely for that reason the refund has been rejected. It is seen that the appellant have produced certificates of Garrison Engineers showing the nature of work done and the date of contract, which are two relevant factors needed for processing the claim. Merely because the original contracts could not be produced, due to them being covered by Official Secrets Act, the rejection of refund claim is not correct. The orders of lower authorities do not examine the certificates of the Garrison Engineers which prescribes not only the nature of contract but the date of contract as well. The original adjudicating authority will take the Certificate of the Garrison Engineers on the face value and process the refund claim accordingly, for each contract and give finding - The appeal is partly allowed by way of remand. 2022 (8) TMI 640 Time Limitation - Cash Refund of Service Tax paid - Service Tax paid against service to be provided which was not so provided when the advances were returned to the customers - provisions of Section 76 of the Finance Act, 1994 and Rule 6(3) of the Service Tax Rules, 1994 ignored - refund of Service Tax when no taxable service was provided and the payment of service tax was a mistake of law - time limitation - relevant date for computation of the limitation period under Section 11 B of the Central Excise Act, 1944 should be reckoned from the date of cancellation of the agreement to provide the taxable service since the cause of action for refund of service tax arises only on cancellation of the agreement to provide taxable service? HELD THAT:- Admittedly, the GST Act has come into force w.e.f., 01.07.2017. It is not in dispute that agreements with three prospective purchasers have been cancelled during 2017. The writ petition filed against cancellation of No Objection by HAL has been disposed on 29.5.2020. It is obvious that if a project does not commence, the flat buyers might seek cancellation of agreements as they cannot wait indefinitely. The refunds have been made in July 2017 and the application has been filed in August, 2017. Section 142(5) of the GST Act makes it clear that the claim for refund must be processed notwithstanding anything contrary contained in Section 11B of the Central Excise Act. The respondent is directed to consider the application and refund the amount within an outer limit of three months from the date of receipt of a copy of this judgment - appeal allowed. 2022 (8) TMI 633 Benefit of scheme under SVLDR, could not be availed - unable to deposit the money because of technical glitches in the system of the department - HELD THAT:- Without going into the truthfulness and verification of such allegation, this writ petition is not entertained for the reason that the said scheme has already expired long back and it is the authority concerned who can only consider the grievance of the petitioner in accordance with law. Accordingly, no relief can be granted to the petitioner in this writ petition except requesting the authority concerned to consider and dispose of the representation of the petitioner being Annexure P-5 to the writ petition in accordance with law - Petition disposed off. Central Excise 2022 (8) TMI 642 Validity and jurisdiction to adjudicate the subsequent SCN - Order-in-Original passed in proceedings pursuant to the show cause notice are ordered to be revived and to be transferred to the Additional Director General, Directorate General of Central Excise Intelligence, Delhi Zonal Unit, New Delhi for decision with the proceedings initiated pursuant to the first show cause notice - HELD THAT:- Considering the fact that both the show cause notices - one dated 1-3-2016 issued by the Directorate General of Central Excise Intelligence, Delhi Zonal Unit and the subsequent show cause notice dated 23-10-2017 issued by the Commissioner, Central Goods and Services Tax Commissionerate, Alwar were on the same subject - matter, the High Court is justified in passing the impugned judgment and order and directing that both the notices to be adjudicated and heard together by one authority. There are no reason to interfere with the impugned judgment and order passed by the High Court - it is directed that, now both the show cause notices one dated 1-3-2016 and the subsequent show cause notice dated 23-10-2017 be adjudicated by only one authority, namely, the Additional Director General, Directorate General of Central Excise Intelligence, Delhi Zonal Unit, New Delhi and/or the equivalent authority, to be decided and disposed of within a period of six months from today. SLP disposed off. 2022 (8) TMI 641 Classification of goods - Mis-rolls - Whether the Learned Tribunal without going into the merits of the case and without even seeing the documents was right in simply passing the order on the basis of the ratio laid down in the decision of the Tribunal in Jai Raj Ispat Limited Vs- Commissioner of Central Excise, Hyderabad-IV [ 2006 (7) TMI 210 - SUPREME COURT ]? - misrolls arising during the process of manufacture of CTD bars would fall under tariff entry 72.04 or 72.07 or not? - recovery of CENVAT Credit - interest - penalty - HELD THAT:- The Tribunal in the impugned orders has left open the classification issue. If such be the circumstances, the learned Tribunal ought to have made an endeavour to consider the facts of the case, specially when the allegation in the show cause notice issued by the adjudicating authority was that the assessee does not process furnace for melting such waste and scrap and it is practically impossible for the assessee to manufacture MS Flat/Bar, MS Angle, MS Channel, MS Round etc. from the said items which are various types of scraps. Assessee contended that, the demand notice has been issued without any enquiry and investigation in the factory of the assessee and the burden of proof is on the department to show that the goods purchased from SAIL and others have been disposed off without use in their factory. Further, it was contended that the department does not dispute payment of duty on goods purchased from SAIL and others, payment of duty on the final products manufactured by them, there was no revenue loss and therefore, proceedings could not have been initiated against the assessee. The substantial questions of law does arise for consideration in these appeals, more particularly, the question whether the Tribunal without going into the merits of the case and without noting the documents was right in simply passing the order on the basis of the decision in the case of Jai Raj Ispat Ltd. [ 2006 (7) TMI 210 - SUPREME COURT ] and whether the learned Tribunal failed to note that the judgment in the case of Jai Raj Ispat Ltd. was pertaining to a classification issue. The appeals are allowed and the substantial questions of law are answered in favour of the revenue - matters are remanded to the Tribunal to consider the cases afresh and after taking note of the factual position, as well as the legal and various decisions that may be relied upon. The learned Tribunal shall pass a speaking order on merits and in accordance with law. 2022 (8) TMI 639 Reversal of CENVAT Credit - manufacture of dutiable as well as exempt goods - appellants have a 100% EOU unit as well as a DTA unit located adjacent to each other - manufacture dutiable goods viz. PVC vinyl floorings, PVC film/sheets, PVC leather cloth etc. classified under Chapter 39 and coated cotton fabrics classified under Chapter 59 of the First Scheduled to the Central Excise Tariff Act, 1985 as well as manufacture and clearance of coated cotton fabrics (deluxe) falling under Chapter 5903 without payment of Central Excise duty by availing benefit of Notification No. 30/2004 dated 9.7.2004 - non-maintenance of separate records - applicability of Rule 6(3) (i) of the Cenvat Credit Rules, 2004 - CENVAT credit on services like Transport Charges, Testing Charges, Import Charges, Freight Charges availed - procedure laid down under clause 3A of Rule 6 for determination and payment of amount equivalent to Cenvat credit attributable to inputs and input services used in or in relation to the manufacture of exempted goods, not followed. HELD THAT:- In the light of judicial pronouncements it is clear that (i). Rule 6 lays down the obligations of the manufacturer of dutiable and exempted goods and provider of taxable, and exempted services; Rule 6 (1) and (2) Provide for different situations; (ii). Rule (3) starts with a non estante clause; it begins with the words notwithstanding and refers to Sub-Rules (1) and (2) of Rule 6 of CCR, 2004; once the conditions stipulated in Sub-Rule (3) are complied with, the provisions of Sub-Rule (1) and (2) will not be applicable; sub-Rule (3) clearly provides that if the provider of output service does not opt to maintain separate accounts, he should comply with the provision of Rule 6(3)(c) of the said Rules; (iii). Reversal amounts to non availment of credit; (iv). It is not open for the revenue to thrust upon the assessee the choices available under Sub-Rule (3); (v). It is not the intention of the legislature to demand huge amounts of credit disproportionate to the credit availed on exempted goods. Validity of reliability on judgment of Mumbai High Court in the case of COMMISSIONER OF C. EX., THANE-I VERSUS NICHOLAS PIRAMAL (INDIA) LTD. [ 2009 (8) TMI 224 - BOMBAY HIGH COURT] by Revenue - HELD THAT:- It was held in the case of Nicholas Piramal that if separate inventory is not maintained, then, the manufacturer would have no option, but to pay amounts specified in Rule 6(3)(i) of the Cenvat Credit Rules, 2004; mere reversal of the availed Cenvat credit would not be sufficient; procedure needs to be followed. The decision of Principal Bench in the case of M/S AGRAWAL METAL WORKS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX, ALWAR [ 2022 (7) TMI 924 - CESTAT NEW DELHI] , relied upon, being the latest one, where it was held that The demand has been made under Rule 6 (3) of CCR, 2004. It has been held by the Hon ble High Court of Andhra Pradesh and Telangana in the case of M/S TIARA ADVERTISING VERSUS UNION OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE [ 2019 (10) TMI 27 - TELANGANA AND ANDHRA PRADESH HIGH COURT] that the various options under Rule 6 are options given to the assessee and the Revenue cannot choose one of the options and force it upon the assessee. Even if the assessee is rendering exempted services or manufacturing exempted goods and using common input services no demand can be sustained under Rule 6 (3) as this is only one of its options available to assessee to fulfill its objection. The appellants have submitted to the Audit party as well as the adjudicating authority that process involved in the manufacture of goods respectively i.e. coated cotton fabrics (deluxe) by M/s Responsive Industries and Hawser Fishing Net by M/s Axiom Cordages Ltd did not involve the raw material which is disputed to have been a common input by the Department - It is found that the appellants have given a detailed submission on the process of manufacture of the impugned goods. The learned adjudicating authority has not gone into the submissions and has simply brushed aside the arguments of the appellant saying that understandably, the raw material used is common - Department has not taken any steps to negate the claims of the respective appellants. No Panchnama indicating the process of manufacture has been drawn, in the least, leave alone obtaining any technical opinion to support or to contradict the submissions of the appellants. The only averment of the learned adjudicating authority appears to be that the input services are understandably, used in the manufacture of dutiable as well as exempted goods - it is not open to the Department to brush aside the submissions of the appellants without a proper enquiry and reason. In the absence of a systematic study and negation of the appellant s submissions, the findings of the learned adjudicating authority are not legally tenable. Validity of acceptance of Chartered Accountant s certificates without giving any reasons thereof - HELD THAT:- It is not a case of the Department that the said Chartered Accountant has been examined. Learned Commissioner was within his rights to call the said Chartered Accountants and examine him to find out and establish the veracity or otherwise of the certificates issued by them. Interestingly, one more argument taken by the learned adjudicating authority is that the certificates given by the Manpower Recruitment Agency in respect of Axiom Cordages Ltd are verbatim to the end and do not disclose any details - in the absence of any enquiry, verification or examination of the persons concerned, the conclusion drawn by the learned adjudicating authority do not sustain the scrutiny of law. The impugned orders are not sustainable. The learned adjudicating authority mainly relies on the averments that the appellants did not disprove the allegation made in the show-cause notice. It is a matter of record that the appellants have given elaborate submissions in response to Audit reports and also during the adjudication proceedings, it is apparent that the learned adjudicating authority has not gone into the submissions in detail and has not negated the assertions made by the appellant in a reasoned manner. It is to be noted that it is the Department who are alleging certain non-observance, of procedures by the appellants and availment of CENVAT Credit in a proper manner, on the part of the appellants. Therefore, it was incumbent upon the Department to prove the same with cogent evidence, reasoned argument and on a legal basis. Having not discharged their onus, the Department cannot simply brush aside the submissions of the appellants. The appellants have reversed the credit attributable to the inputs or inputs services alleged to have been used in the manufacture of exempted goods - the reversal of CENVAT Credit amounts to non-availment of CENVAT Credit and therefore, demands would not sustain. The appeal is partly allowed by way of remand to the adjudicating authority for a limited purpose of verifying the conclusion of reversal. In case the amount reversed by the appellant falls short of the requisite amount, the appellants shall pay the difference along with interest. 2022 (8) TMI 638 Rejection of refund claim - refund rejected on the ground that proper documents were not submitted - HELD THAT:- It has categorically been recorded by the Original Authority as well as the Commissioner (Appeals) that the only reason for rejection of refund is that proper documents were not submitted. It is deemed proper to remand the matter to the Original Authority to give the Appellant an opportunity to produce all relevant documents and also explain the apparent mismatches in the invoice details, etc. - appeal allowed by way of remand. 2022 (8) TMI 634 Validity of Show Cause notice - Non adjudication / delayed adjustication of SCN for 11 years - CENVAT Credit - inputs - Menthol/Menthol flakes - Mentholised Oil (DMO) - Deterpinated Menthol like inputs - invoices issued by the J K and North East based units by showing supply of raw materials without supply of goods - It was held by the High Court that In the present case, no explanation has been offered in the written statement which can be held to be a plausible explanation for not adjudicating upon the Show Cause Notice within the time prescribed. HELD THAT:- In the peculiar facts and circumstances of the present case, there are no reason to interfere. The Special Leave Petition is dismissed. CST, VAT & Sales Tax 2022 (8) TMI 637 Re-opening of assessment - whether a formal communication of the acceptance of the return filed by way of self-assessment under Section 9 (2) of the OET Act is a pre-requisite to the reopening of an assessment under Section 10 (1) of the OET Act? - HELD THAT:- Both sets of provisions of the OVAT Act and the OET Act respectively, therefore, make it mandatory for scrutiny of every return by a dealer. The corresponding Rule under the OET Rules is Rule 15 as amended with effect from 19th October 2005 - It requires compliance with Section 7 (10) and 7 (11) of the OET Act. The same result would be reached from a collective reading of Section 39 of the OVAT Act with Rule 48 of the OVAT Rules as they stood prior to 1st October, 2015. The long and short of this discussion is that under the OET Act there is no concept of a deemed acceptance of a return filed by way of self assessment if nothing is heard from the Department after it is filed. There has to be an overt act of communication of such acceptance by the Department to the dealer. This Court is of the considered view, therefore, that the decision of the Division Bench of this Court in M/S. NEELACHAL ISPAT NIGAM LTD. VERSUS STATE OF ORISSA AND OTHERS [ 2016 (12) TMI 1203 - ORISSA HIGH COURT ] which holds that if the authorities have not issued any notice under Section 7 (11) of the OET Act, then the self assessment of the dealer under Section 9 (2) of the OET Act should be taken to have been accepted does not set down the correct legal position and to that extent, the said decision is hereby overruled. The sum total of the discussion is that as far as a return filed by way of self assessment under Section 9 (1) read with Section 9 (2) of the OET Act is concerned, unless it is accepted W.P.(C) Nos.7458 of 2015 and 7296 of 2013 Page 30 of 30 by the Department by a formal communication to the dealer, it cannot be said to be an assessment that has been accepted and without such acceptance, it cannot trigger a notice for reassessment under Section 10 (1) of the OET Act read with 15 B of the OET Rules - Petition disposed off. 2022 (8) TMI 636 Validity of assessment order - turnover addition - reduction to 50% of the conceded turnover - contention raised by the petitioner is that compounding was done as some clerical errors were detected by the Intelligence officer, but the addition was not warranted - HELD THAT:- No supporting evidence was produced to substantiate the contention of the petitioner. Subsequent to the compounding, no revised return was filed. The closing stock inventory filed is also defective. The petitioner has not uploaded the closing stock inventory in Form No.53 in a proper format. Though the Chartered Accountant had given a letter which was extracted in the order of the Tribunal, the same was not accepted as a reconciliation as to the difference of stock value within Form No.53 and audited account. The Tribunal held that the veracity of the contention as to the quantitative of analysis is impossible as Form 53 uploaded does not reveal the quantity of nature of gold. The stock verification of Rs. 2,23,32,982/- is of substantial nature and that too in respect of gold. Since the Tribunal is also held that in the absence of supporting documents, the Tribunal is unable to interfere with the finding. The rejection of the explanation of the alleged difference of closing stock value due to the increased rate of the ornaments, was not considered by the Tribunal. The Tribunal has not taken into consideration the entire contentions put forward by the revision petitioner. Hence, the matter has to be remitted to the Assessing Authority for fresh consideration and the Assessing Authority shall proceed with the finalisation of the assessment. The matter is remitted to the Assessing Authority for passing fresh orders in accordance with the law. Indian Laws 2022 (8) TMI 635 Dishonor of Cheque - habitual criminal or not - petitioner s application for parole for a period of two months is rejected - Section 138 of the Negotiable Instruments Act, 1881 - HELD THAT:- This Court has categorically come to the conclusion that Rule 191 of 1974 Rules is not invocable against the petitioner, since it could be invoked when there is very serious offence. It also observed that the conviction of the petitioner is under the NI Act which are ordinarily treated as minor offences in criminal jurisprudence. It is also observed that there is no material to show that the petitioner is classified as habitual criminal in terms of the said Rule - When this Court has specifically observed that Rule 191 of 1974 Rules is not invocable against the petitioner, the respondent-Police authorities could not have raised the same objections in the present writ petition also. There is no impediment to consider the petitioner s request for parole under Rule 191 of 1974 Rules. The Police report (Annexure-F) which is relied on by the respondent-Police authorities also cannot be a material to deny consideration of petitioner s application for parole. The apprehension of the respondents that the petitioner may threaten the witnesses who had deposed against the petitioner has no basis. Since the petitioner is not declared as an habitual criminal, the apprehension of the respondents that the petitioner may repeat the offence is also has no basis - the application of the petitioner for parole needs to be reconsidered by the respondent-authorities. The writ petition is allowed.
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